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 movie theater chain AMC Entertainment Holdings Inc. (AMC), printing, imaging company Eastman Kodak Co. (KODK), and retail drug store chain Rite Aid Corp. (RAD).
Small-cap stocks, as represented by the Russell 2000 Index, have significantly outperformed the broader market, providing investors with a total return of 61.8% compared to the Russell 1000’s total return of 39.9% over the past 12 months. These market performance numbers and the statistics in the tables below are as of June 23, 2021.
Here are the top three small-cap stocks with the best value, fastest growth, and the 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 you’re paying less for each dollar of profit generated.
- Dynex Capital Inc.: Dynex Capital is a real estate investment trust (REIT) that invests in mortgage loans and securities on a leveraged basis. It has investments in both residential and commercial securitized mortgage loans.
- SiriusPoint Ltd.: SiriusPoint is a Bermuda-based global insurance and reinsurance company. It has insurance lines for environmental, property, energy, workers compensation, as well as aviation and space. Other sources of revenue are reinsurance lines for life, accident and health, property, casualty, credit, and more.
- NN Inc.: NN is a diversified industrial company that designs and manufactures high-precision metal and plastic components for a range of global markets and industries, including the aerospace, automotive, electrical, and medical industries. The company recently announced the appointment of Mike Felcher to senior vice president and chief financial officer (CFO), effective July 1, 2021. Felcher has been chief accounting officer since June 2018. The current CFO, Tom DeByle, is retiring.
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 year-over-year (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 or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.
- BRP Group Inc.: BRP Group is an insurance distribution holding company. It provides a range of insurance and risk management solutions for both individuals and businesses. The company recently announced that two of its subsidiaries have agreed to acquire RogersGray Inc., Breakwater Brokerage LLC, and Monomoy Insurance Group LLC, which are collectively known as “RogersGray”. RogersGray provides commercial lines, personal lines, and employee benefits insurance services. Financial terms of the transaction, which is expected to close July 1, 2021, were not disclosed.
- Builders FirstSource Inc.: Builders FirstSource is a supplier of structural building products, prefabricated components, and value-added services to the new residential construction and repair and remodeling market. The company announced in late May that it has agreed to acquire Cornerstone Building Alliance SW LLC, a building materials supplier, for approximately $400 million. The transaction is expected to close near the end of the second quarter of 2021.
- Nautilus Inc.: Nautilus designs and sells fitness equipment, including indoor bikes, treadmills, ellipticals, home gyms, and adjustable all-in-one free weights systems. It also offers a digital fitness platform that adapts to the user’s ability and mood.
These are the small-cap stocks that had the highest total return over the last 12 months.
|Small-Cap Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|GameStop Corp. (
|Cassava Sciences Inc. (
|Pacific Biosciences of California Inc. (
- GameStop Corp.: GameStop operates a chain of video game and entertainment software stores that sell video game hardware, software, and accessories globally. GameStop is included in the Russell 2000 small-cap index even though its current market capitalization is well above the upper limit to be considered a small-cap stock. The stock has soared to a level far above its long-term average this year, gaining momentum on the back of what has been called a “meme-stock” buying frenzy. When the Russell indexes are reconstituted after the market closes on June 25, 2021, GameStop is likely to be added to the Russell 1000, a mid- and large-cap index. GameStop recently announced the appointment of two former Amazon.com Inc. (AMZN) executives to top positions: Matt Furlong as chief executive officer (CEO) and Mike Recupero as CFO. Both Furlong and Recupero held senior roles at Amazon overseeing growth initiatives.
- Cassava Sciences Inc.: Cassava Sciences is a clinical-stage biopharmaceutical company that develops drugs using its proprietary technology. It is focused on developing drugs for the treatment of nervous system disorders, such as Alzheimer’s disease.
- Pacific Biosciences of California Inc.: Pacific Biosciences designs and develops innovative tools for biological research with a specific focus on the synthesis and regulation of DNA, RNA, and protein. The company has created a technology platform that enables real-time analysis of biomolecules with single molecule resolution.
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