Small-cap stocks are public companies that have market capitalizations ranging from $300 million to $2 billion. Since the share prices of these companies can be very volatile, some companies in the small-cap universe, or in small-cap indexes, can have market caps significantly higher than this range at any particular time. Some of the stocks classified as small caps are movie theater chain AMC Entertainment Holdings Inc. (AMC), printing, imaging company Eastman Kodak Co. (KODK), and retail drug store chain Rite Aid Corp. (RAD).

Small-cap stocks, as represented by the Russell 2000 Index, have significantly outperformed the broader market, providing investors with a total return of 64.5% compared to the Russell 1000’s total return of 46.3% over the past 12 months. The market performance numbers and the statistics in the tables below are as of May 25, 2021.

Here are the top three small-cap stocks with the best value, fastest growth, and the most momentum. The market valuations of some of the companies listed below are above the generally agreed upper limit of $2 billion for a stock to be considered small cap. This tends to happen in periods of higher volatility, especially for momentum stocks. However, they are still classified as small cap because stocks are not re-indexed as rapidly as their price movement. Their valuations could drop later as volatility subsides.

These are the small-cap stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Best Value Small-Cap Stocks
  Price ($) Market Cap ($B) 12-Month Trailing P/E Ratio
Dynex Capital Inc. (
DX)
19.26 0.6 1.2
SiriusPoint Ltd. (
SPNT)
10.42 1.7 2.3
Home Point Capital Inc. (
HMPT)
6.24 0.9 2.6

Source: YCharts

  • Dynex Capital Inc.: Dynex Capital is a real estate investment trust (REIT) that invests in mortgage loans and securities on a leveraged basis. It has investments in both residential and commercial securitized mortgage loans.
  • SiriusPoint Ltd.: SiriusPoint is a Bermuda-based global insurance and reinsurance company. It has insurance lines for environmental, property, energy, workers compensation, as well as aviation and space. Other sources of revenue are reinsurance lines for life, accident and health, property, casualty, credit, and more.
  • Home Point Capital Inc.: Home Point Capital is a holding company operating as a residential mortgage originator and servicer. It operates primarily through a wholesale, business-to-business-to-customer distribution model. Home Point Capital announced in early May financial results for Q1 of its 2021 fiscal year (FY), the three-month period ended March 31, 2021. The company reported net income of $149.0 million, a significant turnaround from the $10.6 million net loss posted in the year-ago quarter. Revenue for the quarter rose 524.3% to $422 million from a year ago.

These are the top small-cap stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and their most recent quarterly YOY earnings per share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.

Fastest Growing Small-Cap Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
Corsair Gaming Inc. (
CRSR)
31.60 2.9 3,450 71.6
eXp World Holdings Inc. (
EXPI)
28.18 4.1 2,530 115.1
First BanCorp (
FBP)
12.37 2.7 2,700 24.3

Source: YCharts

  • Corsair Gaming Inc.: Corsair Gaming designs and sells gaming and streaming peripherals, components, and systems. Its equipment allows creators to produce studio-quality content. The company announced in early May financial results for Q1 FY 2021, which ended March 31, 2021. Net income for the quarter rose 3,739.2% as revenue grew 71.6% compared to the year-ago quarter. Cost of revenue and operating expenses rose at a slower pace than revenue, helping to boost net income.
  • eXp World Holdings Inc.: eXp World Holdings is a holding company that, through its subsidiaries, designs and develops cloud-based, agent-owned real estate solutions. The company announced in early May financial results for Q1 FY 2021, which ended March 31, 2021. Net income increased 3,336.9% as revenue rose 115.1% compared to the year-ago quarter.
  • First BanCorp: First BanCorp operates as a bank holding company that, through its subsidiaries, provides a range of banking products and services. It offers savings accounts, debit and credit cards, business and personal loans, mortgages, online banking, and more.

These are the small-cap stocks that had the highest total return over the last 12 months.

Small-Cap Stocks with the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
GameStop Corp. (
GME)
209.43 14.8 4,910
Cassava Sciences Inc. (
SAVA)
47.77 1.9 2,140
Cambium Networks Corp. (
CMBM)
53.97 1.4 1,230
Russell 1000  N/A N/A 46.3
Russell 2000 N/A N/A 64.5

Source: YCharts

  • GameStop Corp.: GameStop operates a chain of video game and entertainment software stores. These stores sell video game hardware, software, and accessories globally. GameStop is included in the Russell 2000 small-cap index even though its current market capitalization is well above the upper limit to be considered a small-cap stock. The reason for this is because the stock has risen to a level far above its long-term average and the index has not been reconstituted yet. Because the stock has been so volatile lately, it may not remain at its currently elevated level. On April 19, 2021, the company announced that CEO George Sherman would be stepping down from his position on July 31, 2021, or earlier depending on the appointment of a successor. The move is just the latest in a series of changes that have been made by the company since Chewy Inc. (CHWY) co-founder Ryan Cohen became a board member in January.
  • Cassava Sciences Inc.: Cassava Sciences is a clinical-stage biopharmaceutical company that develops drugs using its proprietary technology. It is focused on developing drugs for the treatment of nervous system disorders, such as Alzheimer’s disease.
  • Cambium Networks Corp.: Cambium Networks offers wireless broadband solutions. It provides point-to-point and point-to-multipoint platforms for video, VoIP, Wifi, switching, software, and accessories.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Leave a Reply

Your email address will not be published. Required fields are marked *