3 High-Potential Small-Cap Stocks Wall Street Loves
As the financial landscape evolves, investors are increasingly turning their attention to small-cap stocks, which are often more sensitive to changes in interest rates compared to their larger counterparts. Small-cap stocks, characterized by their market capitalization generally under $2 billion, tend to carry higher debt levels, making them more responsive to lower interest rates. This dynamic opens the door to considerable growth opportunities, especially in diverse industries like medical, biotech, and chemicals. As these sectors show robust potential for expansion, investors should consider fundamentally strong small-cap stocks such as Owens & Minor, Inc. (OMI), Orion S.A. (OEC), and Cerus Corporation (CERS).
Why Invest in Small-Cap Stocks Now?
Historically, small-cap stocks have outperformed large-caps during economic recoveries. With inflation currently stabilizing at 2.1%, slightly above the Federal Reserve’s target, rumors of rate cuts in December could bolster small-cap stock valuations. According to recent data, the U.S. economy grew at an impressive annualized rate of 2.8% in the third quarter, further raising investor optimism towards small-cap stocks.
Additionally, the exposure to various sectors offered by small-cap stocks helps minimize regulatory risks and sector-specific downturns. Increased consumer demand for growth-oriented investment opportunities also contributes to small-cap stocks’ appeal in volatile market conditions.
Spotlight on Top Small-Cap Stocks
Owens & Minor, Inc. (OMI)
With a market capitalization of $1.03 billion, Owens & Minor, Inc. operates as a global healthcare solutions company, under two primary segments: Products & Healthcare Services and Patient Direct. A significant partnership announced on September 10, 2024, with Google Cloud aims to enhance the QSight clinical inventory management system using AI for real-time insights and predictive management.
OMI’s financial performance showcases its potential. The company reported a 4.2% year-over-year revenue increase to $2.67 billion for the fiscal second quarter, with a non-GAAP net income up by 98% to $28.15 million. Based on the analysts’ forecasts, OMI’s revenue for the quarter ending September 30, 2024, is expected to grow by 3.4% to $2.68 billion. Despite a recent stock decline of 8.2%, the average analyst price target of $20 indicates a promising upside potential of 49.7%.
Orion S.A. (OEC)
Orion S.A., with a market capitalization of $898.69 million, is based in Senningerberg, Luxembourg. The company specializes in manufacturing and selling carbon black products used in various industries. OEC reported a net sales increase of 4% year-over-year to $477 million in the second quarter of 2024, with an impressive operating income of $109.80 million.
With the forecast of revenue growth by 3.1% for the upcoming quarter and an anticipated 143.9% increase in EPS for the quarter ending December 31, 2024, OEC’s stock currently trades at $15.40, reflecting an 11.2% decline over the past year. However, the average analyst price target of $22 indicates a potential upside of 42.1%.
Cerus Corporation (CERS)
Valued at $282.29 million, Cerus Corporation focuses on biomedical products, notably the INTERCEPT Blood System designed to enhance blood safety. In its latest fiscal third-quarter results, CERS reported a 7.2% year-over-year revenue increase to $50.66 million, signaling its strong market position.
With a stock price of $1.58, CERS has seen a 14.5% year-over-year gain, alongside a whopping 151.6% upside potential, as indicated by the average analyst price target of $4. This positive outlook is backed by the company’s strong fundamentals and recent upward trends in revenue.
Conclusion
Given the current economic scenarios and the promising outlook for certain sectors, investors looking for growth opportunities would do well to consider these three small-cap stocks: Owens & Minor (OMI), Orion (OEC), and Cerus (CERS). Their solid fundamentals, combined with favorable market dynamics, position them as viable candidates for those pursuing long-term gains as the market recovers and evolves.
