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5 Small Hidden Gems to Pick From a Rangebound Wall Street
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U.S. stock markets have witnessed rangebound trading in the past three weeks. Investors seem confused about the movements of the market. The primary reason is that the U.S. economy is currently facing a dichotomy.
Several measures of inflation continued to decline in March but remained above the Fed’s 2% target. The resilient labor market has shown cracks. The hourly wage rate increased 4.2% year over year in March, reflecting its lowest monthly gain since June 2021. A series of weak economic data for the last two months clearly indicated that Fed’s rate hike started delivering the desired results.
On the other hand, a section of market participants and financial researchers are concerned that a probable recession later this year will hurt Wall Street to a large extent. A sharp drop in consumer spending, especially in retail sales, a devastated housing sector, weak manufacturing and services data and the recent softness in the resilient labor market might lead to a recession in the near-term.
Small Businesses Suffer the Most
Small business operators are most susceptible to recession. The major issue for U.S. small businesses is galloping inflation, which is currently well above the Fed’s target rate of 2%. The global breakdown of supply-chain systems due to the pandemic and the shortage of manpower has hurt these companies the most. Small businesses are unable to pass on the total hike in input costs to their final products deteriorating their financial conditions.
Small businesses are major sufferers of a higher interest rate regime. These companies operate on a thin profit margin and most new businesses take time to achieve profitability. Moreover, small businesses, have no geographical diversification and depends on U.S. consumers. Therefore, a slowdown in U.S. consumer spending is likely to hurt small firms
Positive Developments
The National Federation of Independent Business said in its last report that its Small Business Optimism Index went up to 90.1 in March beating the consensus estimate of 89. However, the metric is still well below its 49-year average of 98.
The Fed has already said that it is approaching the end of the current rate hike cycle. The terminal interest rate is projected at 5.125%, indicating just one 25 basis -points rate hike. A pause in the central bank’s rate hike stance will be beneficial for small businesses that are highly dependent on easy access to cheap credit.
Our Top Picks
We have narrowed our search to five small-cap (market capital < $1 billion) stocks that have provided more than 50% returns year to date with more upside left. These stocks have strong growth potential for the rest of 2023 and have seen positive earnings estimate revisions in the last 60 days. Finally, each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Crawford & Co. (CRD.A - Free Report) is the world's largest independent provider of diversified services to insurance companies, self-insured corporations, and governmental entities. CRD.A provides claims management and outsourcing solutions for carriers, brokers, and corporations in the United States, the United Kingdom, Europe, Canada, Australia, Asia, and Latin America. Crawford operates through four segments: North America Loss Adjusting, International Operations, Broadspire, and Platform Solutions.
CRD.A has expected revenue and earnings growth rates of 4.2% and 24.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 13% over the last 60 days. The stock price of CRD.A has climbed 62.2% year to date.
Universal Insurance Holdings Inc. (UVE - Free Report) operates as an integrated insurance holding company in the United States. UVE is engaged in insurance underwriting, distribution and claims settlement. Universal Insurance generates revenues from the collection and investment of premiums.
UVE’s agency operations which include Universal Florida Insurance Agency and U.S. Insurance Solutions Inc. generate income from policy fees, commissions, premium financing referral fees and the marketing of ancillary services.
Universal Insurance has expected revenue and earnings growth rates of 9% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10% over the last 60 days. The stock price of UVE has soared 80.8% year to date.
Asure Software Inc. (ASUR - Free Report) is a provider of Web-based workforce management solutions that enable organizations to manage their office environment, as well as their human resource and payroll processes. ASUR offers its workforce management solutions under two product lines: NetSimplicity and iEmployee.
Asure Software has expected revenue and earnings growth rates of 10.4% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 40% over the last 60 days. The stock price of ASUR has jumped 77.9% year to date.
Harrow Health Inc. (HROW - Free Report) an eyecare pharmaceutical company, focuses on the discovery, development, and commercialization of ophthalmic therapies. HROW offers ImprimisRx, an ophthalmology outsourcing and pharmaceutical compounded medications. HROW also provides IHEEZO, a chloroprocaine hydrochloride ophthalmic gel; ophthalmic medicines, including IOPIDINE and MOXEZA and MAXITROL eye drops.
Harrow Health has expected revenue and earnings growth rates of 56.3% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 30 days. The stock price of HROW has surged 59.2% year to date.
Riley Exploration Permian Inc. (REPX - Free Report) is an independent oil and natural gas company. REPX is involved in the acquisition, exploration, development and production of oil, natural gas, and natural gas liquids principally in the Permian Basin.
Riley Exploration has expected revenue and earnings growth rates of 35.4% and 60%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the last 30 days. The stock price of REPX has rallied 52.3% year to date.
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5 Small Hidden Gems to Pick From a Rangebound Wall Street
U.S. stock markets have witnessed rangebound trading in the past three weeks. Investors seem confused about the movements of the market. The primary reason is that the U.S. economy is currently facing a dichotomy.
Several measures of inflation continued to decline in March but remained above the Fed’s 2% target. The resilient labor market has shown cracks. The hourly wage rate increased 4.2% year over year in March, reflecting its lowest monthly gain since June 2021. A series of weak economic data for the last two months clearly indicated that Fed’s rate hike started delivering the desired results.
On the other hand, a section of market participants and financial researchers are concerned that a probable recession later this year will hurt Wall Street to a large extent. A sharp drop in consumer spending, especially in retail sales, a devastated housing sector, weak manufacturing and services data and the recent softness in the resilient labor market might lead to a recession in the near-term.
Small Businesses Suffer the Most
Small business operators are most susceptible to recession. The major issue for U.S. small businesses is galloping inflation, which is currently well above the Fed’s target rate of 2%. The global breakdown of supply-chain systems due to the pandemic and the shortage of manpower has hurt these companies the most. Small businesses are unable to pass on the total hike in input costs to their final products deteriorating their financial conditions.
Small businesses are major sufferers of a higher interest rate regime. These companies operate on a thin profit margin and most new businesses take time to achieve profitability. Moreover, small businesses, have no geographical diversification and depends on U.S. consumers. Therefore, a slowdown in U.S. consumer spending is likely to hurt small firms
Positive Developments
The National Federation of Independent Business said in its last report that its Small Business Optimism Index went up to 90.1 in March beating the consensus estimate of 89. However, the metric is still well below its 49-year average of 98.
The Fed has already said that it is approaching the end of the current rate hike cycle. The terminal interest rate is projected at 5.125%, indicating just one 25 basis -points rate hike. A pause in the central bank’s rate hike stance will be beneficial for small businesses that are highly dependent on easy access to cheap credit.
Our Top Picks
We have narrowed our search to five small-cap (market capital < $1 billion) stocks that have provided more than 50% returns year to date with more upside left. These stocks have strong growth potential for the rest of 2023 and have seen positive earnings estimate revisions in the last 60 days. Finally, each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Crawford & Co. (CRD.A - Free Report) is the world's largest independent provider of diversified services to insurance companies, self-insured corporations, and governmental entities. CRD.A provides claims management and outsourcing solutions for carriers, brokers, and corporations in the United States, the United Kingdom, Europe, Canada, Australia, Asia, and Latin America. Crawford operates through four segments: North America Loss Adjusting, International Operations, Broadspire, and Platform Solutions.
CRD.A has expected revenue and earnings growth rates of 4.2% and 24.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 13% over the last 60 days. The stock price of CRD.A has climbed 62.2% year to date.
Universal Insurance Holdings Inc. (UVE - Free Report) operates as an integrated insurance holding company in the United States. UVE is engaged in insurance underwriting, distribution and claims settlement. Universal Insurance generates revenues from the collection and investment of premiums.
UVE’s agency operations which include Universal Florida Insurance Agency and U.S. Insurance Solutions Inc. generate income from policy fees, commissions, premium financing referral fees and the marketing of ancillary services.
Universal Insurance has expected revenue and earnings growth rates of 9% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10% over the last 60 days. The stock price of UVE has soared 80.8% year to date.
Asure Software Inc. (ASUR - Free Report) is a provider of Web-based workforce management solutions that enable organizations to manage their office environment, as well as their human resource and payroll processes. ASUR offers its workforce management solutions under two product lines: NetSimplicity and iEmployee.
Asure Software has expected revenue and earnings growth rates of 10.4% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 40% over the last 60 days. The stock price of ASUR has jumped 77.9% year to date.
Harrow Health Inc. (HROW - Free Report) an eyecare pharmaceutical company, focuses on the discovery, development, and commercialization of ophthalmic therapies. HROW offers ImprimisRx, an ophthalmology outsourcing and pharmaceutical compounded medications. HROW also provides IHEEZO, a chloroprocaine hydrochloride ophthalmic gel; ophthalmic medicines, including IOPIDINE and MOXEZA and MAXITROL eye drops.
Harrow Health has expected revenue and earnings growth rates of 56.3% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 30 days. The stock price of HROW has surged 59.2% year to date.
Riley Exploration Permian Inc. (REPX - Free Report) is an independent oil and natural gas company. REPX is involved in the acquisition, exploration, development and production of oil, natural gas, and natural gas liquids principally in the Permian Basin.
Riley Exploration has expected revenue and earnings growth rates of 35.4% and 60%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the last 30 days. The stock price of REPX has rallied 52.3% year to date.