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5 Small-Cap Stocks to Buy Despite Inflation Headwinds
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Wall Street has been witnessing an impressive bull run in the past 18 months. Year to date, — the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have advanced 4.2%, 17.6% and 24.8%, respectively. The mid-cap-centric S&P 400 is up 4.2%. However, the small-cap specific Russell 2000 has gained a mere 0.8%, while the other benchmark — the S&P 600 — is down 2.3%, year to date.
U.S. small businesses are still suffering from high inflation and interest rates. On May 2, the CNBC|SurveyMonkey Small Business Survey for second-quarter 2024 reported that 24% of respondents believe the inflation rate has already reached its peak compared with 29% in the first quarter.
In the second quarter, 75% of respondents expect inflation to rise from here compared with 69% in the previous quarter. Likewise, 31% of the small business owners are, “very or somewhat confident” in the second quarter about the Fed’s ability to control inflation, down from 35% the previous quarter and on par with 31% from the second quarter of last year.
Confidence Remains Steady
Despite inflationary headwinds, the CNBC|SurveyMonkey report revealed that Small Business Confidence remained stable at 47% in the second quarter, on par with the first-quarter level, and 46% reported in the second quarter of 2023. The NFIB (National Federation of Independent Business) Small Business Optimism Index increased in June to 91.5 from 90.5 in May, marking the 30th consecutive month below the 50-year average of 98. However, the reading for June was the highest so far this year.
NFIB Chief Economist Bill Dunkelberg said, “Main Street remains pessimistic about the economy for the balance of the year. Increasing compensation costs has led to higher prices all around. Meanwhile, no relief from inflation is in sight for small business owners as they prepare for the uncertain months ahead.”
Our Top Picks
We have narrowed our search to five small-cap (market capital < $1 billion) stocks. These stocks have strong growth potential for the rest of 2024 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 picks year to date.
Image Source: Zacks Investment Research
American Axle & Manufacturing Holdings Inc. (AXL - Free Report) designs, engineers, and manufactures driveline and metal forming technologies that support electric, hybrid and internal combustion vehicles. AXL operates through two segments — Driveline and Metal Forming. AXL manufactures Driveline and Metal Forming technologies to support electric, hybrid and internal combustion vehicles. AXL operates with around 80 facilities in 18 countries.
American Axle & Manufacturing Holdings has expected revenue and earnings growth rates of 3.1% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.3% over the last 60 days.
EverQuote Inc. (EVER - Free Report) is an online insurance marketplace. Through its Internet websites, EVER operates an online marketplace for consumers shopping for auto, home and renters and life insurance.
EVER presently reports two main verticals — Auto and Home and Renters.EVER aims is reshape insurance shopping for consumers and improve the way insurance providers attract and connect with customers shopping for insurance.
EverQuote has expected revenue and earnings growth rates of 33.9% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 25% over the last 60 days.
The Gorman-Rupp Co. (GRC - Free Report) designs, manufactures, and sells pumps and pump systems in the United States and internationally. GRC’s products include self-priming centrifugal, standard centrifugal, magnetic drive centrifugal, axial and mixed flow, vertical turbine line shaft, submersible, high-pressure booster, rotary gear, diaphragm, bellows, and oscillating pumps.
GRC’s products are used in water, wastewater, construction, dewatering, industrial, petroleum, original equipment, agriculture, fire suppression, heating, ventilating and air conditioning, military, and other liquid-handling applications. GRC markets its products through a network of distributors, manufacturers' representatives, third-party distributor catalogs, direct sales, and e-commerce.
The Gorman-Rupp has expected revenue and earnings growth rates of 5.9% and 21.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.1% over the last 60 days.
Root Inc. (ROOT - Free Report) provides insurance products and services in the United States. ROOT offers automobile, homeowners, and renters’ insurance products. ROOT operates a direct-to-consumer model, and serves customers primarily through mobile applications, as well as through its website. ROOT’s direct distribution channels also cover digital, media, and referral channels, as well as distribution partners and agencies.
Root has expected revenue and earnings growth rates of more than 100% and 60.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 16.2% over the last 30 days.
Enviri Corp. (NVRI - Free Report) provides environmental solutions for industrial and specialty waste streams in the United States and internationally. NVRI operates through two segments: Harsco Environmental and Clean Earth. NVRI serves a diverse customer base by offering critical recycle and reuse solutions for their waste streams.
Enviri has expected revenue and earnings growth rates of 17.4% 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 60 days.
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5 Small-Cap Stocks to Buy Despite Inflation Headwinds
Wall Street has been witnessing an impressive bull run in the past 18 months. Year to date, — the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have advanced 4.2%, 17.6% and 24.8%, respectively. The mid-cap-centric S&P 400 is up 4.2%. However, the small-cap specific Russell 2000 has gained a mere 0.8%, while the other benchmark — the S&P 600 — is down 2.3%, year to date.
U.S. small businesses are still suffering from high inflation and interest rates. On May 2, the CNBC|SurveyMonkey Small Business Survey for second-quarter 2024 reported that 24% of respondents believe the inflation rate has already reached its peak compared with 29% in the first quarter.
In the second quarter, 75% of respondents expect inflation to rise from here compared with 69% in the previous quarter. Likewise, 31% of the small business owners are, “very or somewhat confident” in the second quarter about the Fed’s ability to control inflation, down from 35% the previous quarter and on par with 31% from the second quarter of last year.
Confidence Remains Steady
Despite inflationary headwinds, the CNBC|SurveyMonkey report revealed that Small Business Confidence remained stable at 47% in the second quarter, on par with the first-quarter level, and 46% reported in the second quarter of 2023.
The NFIB (National Federation of Independent Business) Small Business Optimism Index increased in June to 91.5 from 90.5 in May, marking the 30th consecutive month below the 50-year average of 98. However, the reading for June was the highest so far this year.
NFIB Chief Economist Bill Dunkelberg said, “Main Street remains pessimistic about the economy for the balance of the year. Increasing compensation costs has led to higher prices all around. Meanwhile, no relief from inflation is in sight for small business owners as they prepare for the uncertain months ahead.”
Our Top Picks
We have narrowed our search to five small-cap (market capital < $1 billion) stocks. These stocks have strong growth potential for the rest of 2024 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 picks year to date.
Image Source: Zacks Investment Research
American Axle & Manufacturing Holdings Inc. (AXL - Free Report) designs, engineers, and manufactures driveline and metal forming technologies that support electric, hybrid and internal combustion vehicles. AXL operates through two segments — Driveline and Metal Forming. AXL manufactures Driveline and Metal Forming technologies to support electric, hybrid and internal combustion vehicles. AXL operates with around 80 facilities in 18 countries.
American Axle & Manufacturing Holdings has expected revenue and earnings growth rates of 3.1% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.3% over the last 60 days.
EverQuote Inc. (EVER - Free Report) is an online insurance marketplace. Through its Internet websites, EVER operates an online marketplace for consumers shopping for auto, home and renters and life insurance.
EVER presently reports two main verticals — Auto and Home and Renters.EVER aims is reshape insurance shopping for consumers and improve the way insurance providers attract and connect with customers shopping for insurance.
EverQuote has expected revenue and earnings growth rates of 33.9% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 25% over the last 60 days.
The Gorman-Rupp Co. (GRC - Free Report) designs, manufactures, and sells pumps and pump systems in the United States and internationally. GRC’s products include self-priming centrifugal, standard centrifugal, magnetic drive centrifugal, axial and mixed flow, vertical turbine line shaft, submersible, high-pressure booster, rotary gear, diaphragm, bellows, and oscillating pumps.
GRC’s products are used in water, wastewater, construction, dewatering, industrial, petroleum, original equipment, agriculture, fire suppression, heating, ventilating and air conditioning, military, and other liquid-handling applications. GRC markets its products through a network of distributors, manufacturers' representatives, third-party distributor catalogs, direct sales, and e-commerce.
The Gorman-Rupp has expected revenue and earnings growth rates of 5.9% and 21.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.1% over the last 60 days.
Root Inc. (ROOT - Free Report) provides insurance products and services in the United States. ROOT offers automobile, homeowners, and renters’ insurance products. ROOT operates a direct-to-consumer model, and serves customers primarily through mobile applications, as well as through its website. ROOT’s direct distribution channels also cover digital, media, and referral channels, as well as distribution partners and agencies.
Root has expected revenue and earnings growth rates of more than 100% and 60.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 16.2% over the last 30 days.
Enviri Corp. (NVRI - Free Report) provides environmental solutions for industrial and specialty waste streams in the United States and internationally. NVRI operates through two segments: Harsco Environmental and Clean Earth. NVRI serves a diverse customer base by offering critical recycle and reuse solutions for their waste streams.
Enviri has expected revenue and earnings growth rates of 17.4% 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 60 days.