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 insurance company Genworth Financial Inc. (GNW), printing and imaging company Eastman Kodak Co. (KODK), and retail drugstore chain Rite Aid Corp. (RAD).
Small cap stocks, as represented by the Russell 2000 Index, have underperformed the broader market, providing investors with a total return of 12.0% compared to the Russell 1000’s total return of 25.2% over the past 12 months. These market performance numbers and the statistics in the tables below are as of Jan. 6, 2022.
Here are the top three small cap stocks with the best value, fastest growth, and 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 may 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 that you’re paying less for each dollar of profit generated.
- California Resources Corp.: California Resources is an oil and natural gas exploration and production (E&P) company with operations in California. It produces crude oil, natural gas, and natural gas liquids (NGL). It also operates a power plant that generates electricity from natural gas. The company announced in November financial results for Q3 of its 2021 fiscal year (FY), which ended Sept. 30, 2021. It posted net income of $103 million, a significant improvement from the $29 million net loss reported in the year-ago quarter. Revenue rose 43.8% compared to the year-ago quarter. California Resources said that its improved financial performance enabled it to initiate a quarterly cash dividend, enhancing its shareholder return strategy.
- Shenandoah Telecommunications Co.: Shenandoah Telecommunications is a broadband services provider. It operates high-speed cable, fiber optic, and fixed wireless networks that provide broadband services to customers throughout the U.S.
- Agios Pharmaceuticals Inc.: Agios is a clinical-stage biopharmaceutical company that focuses on developing therapies for clinically defined diseases such as sickle cell disease, pyruvate kinase deficiency (PK), and thalassemia. All three are blood disorders. Agios previously focused on therapies for the cancer metabolism, but in 2020 it agreed to sell its oncology business to Servier Pharmaceuticals LLC for $2 billion plus royalties. The sale was finalized in 2021.
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 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 figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.
- Civitas Resources Inc.: Civitas Resources is an oil & gas production company. It is focused on developing and producing crude oil, natural gas, and NGLs in Colorado’s Denver-Julesburg Basin. The company announced in early November that its board of directors declared a dividend of approximately $0.46 payable on Dec. 30, 2021. The dividend represents a 30% increase from the previous quarterly dividend. Civitas said that it plans to offer an additional variable cash dividend, which is subject to final consideration and approval from the board.
- Kulicke & Soffa Industries Inc.: Kulicke & Soffa Industries is a provider of semiconductor, LED, and electronic assembly solutions. It serves automotive, consumer, communications, computing, and industrial markets globally. The company announced in mid-October that it planned to increase its quarterly dividend by 21% to $0.17 per share of common stock. The dividend is payable on Jan. 10, 2022 to shareholders of record as of Dec. 23, 2021.
- Schnitzer Steel Industries Inc.: Schnitzer Steel Industries is a metals recycling company. It collects, processes, and recycles raw scrap metal and provides processed scrap metal to mills and foundries worldwide.
These are the small cap stocks that had the highest total return over the last 12 months.
- AMC Entertainment Holdings Inc.: AMC Entertainment Holdings is among the largest movie exhibition companies in the world. It operates approximately 950 theaters and 10,600 screens globally.
- Cassava Sciences Inc.: Cassava Sciences is a clinical-stage biopharmaceutical company focused on developing drugs for the treatment of nervous system disorders, such as Alzheimer’s disease.
- Avis Budget Group Inc.: Avis Budget Group provides car rental services. It operates a number of brands, including Avis, Budget, Zipcar, Payless, France Cars, Apex, and more. The company announced in early November financial results for Q3 FY 2021 ended Sept. 30, 2021. Net income expanded nearly fifteenfold as revenue rose 95.6% compared to the year-ago quarter. Avis Budget Group said that demand continued to recover, rising in the third quarter compared to the second quarter, as travel continued to normalize after the initial shock from the COVID-19 pandemic.
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