Back to top

Image: Shutterstock

3 Top-Ranked Small-Caps Investors Shouldn't Ignore

Read MoreHide Full Article

Small-caps have rebounded nicely so far in 2023, undoubtedly a welcomed development among market participants after a rough showing last year.

Still, there is a lot of negative sentiment surrounding the stocks due to their volatile nature at times.

However, many small-cap stocks turn out to be big winners in the long run, and they typically have less analyst coverage, providing investors an opportunity to get in "early" before the crowd.

For those seeking exposure to small-caps, three stocks – Turtle Beach (HEAR - Free Report) , Wingstop (WING - Free Report) , and Horizon Technology Finance (HRZN - Free Report) – could all be considerations.

All three sport a favorable Zacks Rank, indicating optimism among analysts. Let’s take a closer look at each.

Wingstop

Wingstop offers cooked-to-order, hand-sauced, and tossed chicken wings. Currently, the stock carries a favorable Zacks Rank #1 (Strong Buy), with earnings expectations increasing across the board.

Zacks Investment Research
Image Source: Zacks Investment Research

The company has posted robust quarterly results as of late, exceeding the Zacks Consensus EPS Estimate by an average of 31% over the last four quarters. Just in its latest release, Wingstop penciled in a 29% EPS beat and reported revenue 7.7% above expectations.

As shown below, the company’s revenue growth has been remarkable.

Zacks Investment Research
Image Source: Zacks Investment Research

It’s worth noting that investors will have to fork up a premium for WING shares, with the current 92.4X forward earnings multiple undoubtedly expensive. Still, investors have had little issue paying the premium given the company’s strong growth trajectory.

Turtle Beach

Turtle Beach Corporation, a Zacks Rank #2 (Buy), is an audio technology company that designs products for consumer, commercial, and healthcare markets.

Like WING, Turtle Beach posted results that came in well above expectations in its latest release, exceeding the Zacks Consensus EPS Estimate by more than 35%. Quarterly revenue totaled $51 million, 12% ahead of expectations and improving nearly 10% from the year-ago period.

Shares aren’t stretched regarding valuation, with the current 0.7X forward price-to-sales ratio sitting beneath the 0.8X five-year median and highs of 1.6X in 2021. The stock carries a Style Score of “B” for Value.

Zacks Investment Research
Image Source: Zacks Investment Research

Keep an eye out for the company’s next quarterly release on August 14th; the Zacks Consensus EPS Estimate of -$0.33 indicates a 57% jump in earnings from the year-ago period.

Horizon Technology Finance

Horizon Technology Finance makes secured loans to development-stage companies in the technology, life science, healthcare information and services, and cleantech industries. The stock sports the highly-coveted Zacks Rank #1 (Strong Buy), with the revisions trend particularly noteworthy for its current fiscal year.

Zacks Investment Research
Image Source: Zacks Investment Research

For those seeking income, HRZN has that covered; shares currently yield 10.8% annually, crushing the Zacks Finance sector average of an already impressive 2.6%. Dividend growth is there, too, with the company’s payout growing modestly over the last five years.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

With small-caps staging a significant rebound in 2023, investors are undoubtedly looking to ride the trend.

And for those seeking exposure, all three stocks above – Turtle Beach (HEAR - Free Report) , Wingstop (WING - Free Report) , and Horizon Technology Finance (HRZN - Free Report) – deserve a watchlist spot.

All three have witnessed positive earnings estimate revisions among analysts, indicating near-term optimism.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Horizon Technology Finance Corporation (HRZN) - free report >>

Wingstop Inc. (WING) - free report >>

Turtle Beach Corporation (HEAR) - free report >>

Published in