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Small-cap stocks have roared following favorable inflation data, undoubtedly a welcomed development after an extended period of underperformance primarily driven by a hawkish Federal Reserve. They are known for their explosive nature, typically seeing interest from those with higher risk tolerance.
Of course, many small-cap stocks turn out to be big winners in the long run, and they typically receive a relatively lower level of coverage, providing investors an opportunity to get in "early" before the crowd catches on.
And for those interested in small-cap exposure, three stocks – Direct Digital (DRCT - Free Report) , Carrols Restaurant Group , and Comtech Telecommunications (CMTL - Free Report) – should be worth a look. All three sport a favorable Zacks Rank and are coming off a recent EPS beat.
Let’s take a closer look at each.
Direct Digital
Direct Digital, a current Zacks Rank #1 (Strong Buy), brings state-of-the-art supply-side and demand-side advertising platforms together under one umbrella company. Earnings expectations have shot higher across the board.
Image Source: Zacks Investment Research
The company posted notably robust results in its latest release, exceeding the Zacks Consensus EPS Estimate by 360% and posting revenue 75% ahead of the consensus. Impressively, sales grew 130% year-over-year, with prior investments in the company’s technology stack starting to provide tailwinds.
As shown below, the company’s top line growth has been outstanding. This is further reinforced by the stock’s current Style Score of “A” for Growth.
Image Source: Zacks Investment Research
Impressively, the company processed over 400 billion monthly impressions through its sell-side advertising segment, showing an improvement of 220% from last year's comparable period. The business momentum led Direct Digital to up its current year (FY23) revenue guidance, now expecting full-year sales in a band of $170 – $190 million, with the midpoint reflecting growth of 101%.
The better-than-expected results caused shares to melt higher post-earnings, now heading toward all-time highs. Stocks making new highs tend to make even higher highs, especially when analysts' positive earnings estimate revisions are present.
Image Source: Zacks Investment Research
The company’s earnings are forecasted to climb 76% in its current year (FY23) and an additional 90% in FY24.
Carrols Restaurant Group
Carrols Restaurant Group, a current Zacks Rank #1 (Strong Buy), owns and operates over 1,000 restaurants under the Burger King and Popeyes brands. The earnings estimate revisions trend has been particularly bullish for its current fiscal year (FY23), with the $0.42 Zacks Consensus EPS Estimate up more than 200% since last year.
Image Source: Zacks Investment Research
Like DRCT, the company’s shares have seen bullish post-earnings momentum following its latest quarterly release. Concerning the headline figures within the print, Carrols exceeded the Zacks Consensus EPS Estimate by nearly 130% and posted revenue a hair below expectations.
Image Source: Zacks Investment Research
In addition, total restaurant sales grew 7.2%, with the company’s Burger King and Popeyes restaurants seeing comparable restaurant sales growth of 8% and 12%, respectively. Further, the company’s cash-generating abilities improved, with free cash flow throughout the period totaling $33.9 million, well above the $14 million reported last year.
To wrap up the quarterly results, the company’s Board of Directors authorized an initial regular quarterly dividend of $0.02 per share, which is payable on December 15th to shareholders of record as of November 21st.
The company’s earnings are forecasted to soar 160% on 9% higher sales in its current year.
Comtech Telecommunications
Comtech Telecommunications, a current Zacks Rank #2 (Buy), designs, develops, produces, and markets innovative products, systems, and services for advanced communications solutions. Earnings expectations have moved higher among all timeframes.
Image Source: Zacks Investment Research
No different than those above, the stock has enjoyed bullish momentum following its latest quarterly release. Comtech posted a 61% beat relative to the Zacks Consensus EPS Estimate and reported sales 6% ahead of the consensus estimate, with both items improving from the year-ago period.
CMTL’s top line performance has turned around positively, as illustrated below.
Image Source: Zacks Investment Research
And Comtech’s operating performance has improved dramatically, with operating income of $1.1 million throughout its latest quarter well above the loss of -$2.1 million in the comparable period last year.
The company’s earnings are forecasted to climb 100% on 15% higher sales in its current year (FY23).
Bottom Line
Small-cap stocks could be solid considerations for those who can handle a higher level of volatility and have a less conservative approach.
While their price swings can undoubtedly become spooky, their growth potential is impressive.
And all three above – Direct Digital (DRCT - Free Report) , Carrols Restaurant Group , and Comtech Telecommunications (CMTL - Free Report) – boast strong growth trajectories paired with improved earnings outlooks.
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3 Top-Ranked Small-Caps to Buy for Big Growth
Small-cap stocks have roared following favorable inflation data, undoubtedly a welcomed development after an extended period of underperformance primarily driven by a hawkish Federal Reserve. They are known for their explosive nature, typically seeing interest from those with higher risk tolerance.
Of course, many small-cap stocks turn out to be big winners in the long run, and they typically receive a relatively lower level of coverage, providing investors an opportunity to get in "early" before the crowd catches on.
And for those interested in small-cap exposure, three stocks – Direct Digital (DRCT - Free Report) , Carrols Restaurant Group , and Comtech Telecommunications (CMTL - Free Report) – should be worth a look. All three sport a favorable Zacks Rank and are coming off a recent EPS beat.
Let’s take a closer look at each.
Direct Digital
Direct Digital, a current Zacks Rank #1 (Strong Buy), brings state-of-the-art supply-side and demand-side advertising platforms together under one umbrella company. Earnings expectations have shot higher across the board.
Image Source: Zacks Investment Research
The company posted notably robust results in its latest release, exceeding the Zacks Consensus EPS Estimate by 360% and posting revenue 75% ahead of the consensus. Impressively, sales grew 130% year-over-year, with prior investments in the company’s technology stack starting to provide tailwinds.
As shown below, the company’s top line growth has been outstanding. This is further reinforced by the stock’s current Style Score of “A” for Growth.
Image Source: Zacks Investment Research
Impressively, the company processed over 400 billion monthly impressions through its sell-side advertising segment, showing an improvement of 220% from last year's comparable period. The business momentum led Direct Digital to up its current year (FY23) revenue guidance, now expecting full-year sales in a band of $170 – $190 million, with the midpoint reflecting growth of 101%.
The better-than-expected results caused shares to melt higher post-earnings, now heading toward all-time highs. Stocks making new highs tend to make even higher highs, especially when analysts' positive earnings estimate revisions are present.
Image Source: Zacks Investment Research
The company’s earnings are forecasted to climb 76% in its current year (FY23) and an additional 90% in FY24.
Carrols Restaurant Group
Carrols Restaurant Group, a current Zacks Rank #1 (Strong Buy), owns and operates over 1,000 restaurants under the Burger King and Popeyes brands. The earnings estimate revisions trend has been particularly bullish for its current fiscal year (FY23), with the $0.42 Zacks Consensus EPS Estimate up more than 200% since last year.
Image Source: Zacks Investment Research
Like DRCT, the company’s shares have seen bullish post-earnings momentum following its latest quarterly release. Concerning the headline figures within the print, Carrols exceeded the Zacks Consensus EPS Estimate by nearly 130% and posted revenue a hair below expectations.
Image Source: Zacks Investment Research
In addition, total restaurant sales grew 7.2%, with the company’s Burger King and Popeyes restaurants seeing comparable restaurant sales growth of 8% and 12%, respectively. Further, the company’s cash-generating abilities improved, with free cash flow throughout the period totaling $33.9 million, well above the $14 million reported last year.
To wrap up the quarterly results, the company’s Board of Directors authorized an initial regular quarterly dividend of $0.02 per share, which is payable on December 15th to shareholders of record as of November 21st.
The company’s earnings are forecasted to soar 160% on 9% higher sales in its current year.
Comtech Telecommunications
Comtech Telecommunications, a current Zacks Rank #2 (Buy), designs, develops, produces, and markets innovative products, systems, and services for advanced communications solutions. Earnings expectations have moved higher among all timeframes.
Image Source: Zacks Investment Research
No different than those above, the stock has enjoyed bullish momentum following its latest quarterly release. Comtech posted a 61% beat relative to the Zacks Consensus EPS Estimate and reported sales 6% ahead of the consensus estimate, with both items improving from the year-ago period.
CMTL’s top line performance has turned around positively, as illustrated below.
Image Source: Zacks Investment Research
And Comtech’s operating performance has improved dramatically, with operating income of $1.1 million throughout its latest quarter well above the loss of -$2.1 million in the comparable period last year.
The company’s earnings are forecasted to climb 100% on 15% higher sales in its current year (FY23).
Bottom Line
Small-cap stocks could be solid considerations for those who can handle a higher level of volatility and have a less conservative approach.
While their price swings can undoubtedly become spooky, their growth potential is impressive.
And all three above – Direct Digital (DRCT - Free Report) , Carrols Restaurant Group , and Comtech Telecommunications (CMTL - Free Report) – boast strong growth trajectories paired with improved earnings outlooks.