Small-cap stocks are smaller firms with a market cap of $300 million to $2 billion that provide excellent long-term growth prospects. They are among the riskiest of U.S. equity investment vehicles because of their smaller size and heightened volatility and responsibility.
Small-caps are more likely to go through phases of rapid expansion and have more leverage. When interest rates rise, small-caps with that leverage typically sell down quickly. Furthermore, when the market enters a downturn, recession, or contraction, small-cap stocks tend to sell off more than large-cap companies daily. Small-cap stocks have consistently outperformed large-cap equities throughout time.
Although past performance is no guarantee of future results, some small-cap stocks have paid off handsomely in the last year. Finding firms with the desirable financial characteristics we desire, such as reasonable valuation, robust growth, profitability, and momentum, is the key. These critical characteristics can be found in the stocks in this article.
That being said, let’s take a look at three small-cap stocks that are considered by analysts to be innovative additions to our portfolios:
Hudson Technologies Inc (HDSN)
Hudson Technologies, Inc. (HDSN) is a refrigerant services firm that offers solutions to reoccurring issues in the refrigeration sector. Its products and services include refrigerant sales, refrigerant management services, primarily refrigerant reclamation, and services performed at the customer’s site to remove moisture, oils, and other contaminants. They are commonly used in commercial air conditioning, industrial processing, and refrigeration systems. HDSN, based in Woodcliff Lake, NJ, was established on January 11th, 1991, by Stephen P. Mandracchia and Kevin J. Zugibe.
HDSN has been on an upward trajectory, with valuation multiples remaining low and signaling space for further expansion. HDSN has an impressive history of besting analysts’ earnings projections. Most recently, HDSN beat Wall Street’s EPS (Earnings-per-share) forecasts by 360% and revenue expectations by 37.36%. HDSN’s year-over-year numbers are also notable, showing revenue growth of 70.85% and EPS growth of 218.18%. HDSN shows $53.9 million in sales for its current quarter, at 13 cents per share. HDSN has a consensus price target of 7.25 among analysts that provide 12-month price estimates, with a high of 8.00 and a low of 6.50. The median forecast reflects an increase of 13.81% over its most recent price, and HDSN has earned a solid buy rating.
Arcos Dorados Holdings Inc (ARCO)
Arcos Dorados Holdings, Inc. (ARCO) is a restaurant management company. ARCO runs and franchises McDonald’s restaurants in the food service business through its subsidiaries. It is divided into the following geographic segments: Brazil, the Caribbean Division, NOLAD (North Latin America Division), and SOLAD (South Latin America Division) (SLAD). ARCO was created on August 3rd, 2007, in Montevideo, Uruguay.
ARCO’s financials have been fundamental to its success as a small-cap firm. It has beaten analysts’ projections on its fiscal earnings reports in the last four fiscal quarters, most recently beating EPS and revenue predictions by 34.72% and 1.75%, respectively. ARCO also boasts heavy growth-leaning year-over-year numbers. Most notably, ARCO shows year-over-year revenue growth of 28.47% and EPS growth of 120%. ARCO currently has a dividend yield of 1.02%, with a quarterly payout of 2 cents per share. ARCO’s current quarter shows us $708.3 million in sales, at 3 cents per share. The consensus price target for ARCO from analysts that provide 12-month predictions is 8.00, with a high of 10.00 and a low of 8.00. The estimate implies an increase of 2.17% over current pricing, and the consensus gives ARCO a buy rating that should grab the attention of investors.
VAALCO Energy Inc (EGY)
VAALCO Energy, Inc. (EGY) is a company that buys, develops, and produces crude oil. Gabon and Equatorial Guinea are the two portions through which it operates. The Offshore Gabon-Etame Marin Permit operation is the centerpiece of the Gabon Segment. The Equatorial Guinea-Block P operation is covered under the Equatorial Guinea section. Virgil A. Walston and Charles Alcorn formed EGY in 1985, and it is based in Houston, Texas.
Like ARCO, EGY has the distinction of beating Wall Street’s EPS and revenue projections on their last four consecutive earnings reports. Most recently, they impressed by beating EPS expectations by a straight 5% and revenue projections by an impressive 20.03%. EGY’s year-over-year numbers show growth in all areas. EGY shows year-over-year revenue growth of 348.98% and EPS growth of 1050%. EGY shows $69.6 million in sales for its current quarter, at 53 cents per share. EGY currently has a dividend yield of 1.84%, with a quarterly payout of 3 cents per share. The consensus price target for EGY from the analysts that provide 12-month predictions is 8.50, with a high of 10.49 and a low of 5.51. The median forecast indicates an increase of 20.23% from its most recent price, and EGY has an analyst consensus buy rating that shouldn’t be overlooked.
