After a rather choppy start to the year, the broader market has firmed up significantly, as fears over geopolitical tensions and slowing economic growth begin to ease. With sentiment shifting back to “risk-on,” selective small-cap stocks appear to offer exceptional upside opportunity from current levels, most notably those with strong growth forecasts, favorable valuations, and top Zacks Ranks.

Two names in particular, The ONE Group Hospitality ((STKS Quick QuoteSTKS - Free Report) ) and Legacy Education Inc. ((LGCY Quick QuoteLGCY - Free Report) ), stand out as breakout candidates, each showing signs of building momentum ahead of potential major bull runs.

Image Source: Zacks Investment Research

The ONE Group Hospitality: Shares Trade at a Discount to Growth

The ONE Group Hospitality, operator of upscale restaurant brands like STK and Kona Grill, is benefiting from a renewed appetite for in-person dining. After years of volatility and pandemic-related challenges, it appears that “peak takeout” has passed and consumers are returning to restaurants, especially experiential, high-energy venues like those operated by STKS.

The company has recently flipped from negative to positive earnings, marking a significant inflection point. Analysts have responded with sharp upward revisions to estimates: earnings projections for the current year have jumped from a loss of -$0.31 to a gain of $0.51, while next year’s forecast has risen from -$0.08 to $0.69. Not surprisingly, the stock boasts a Zacks Rank #1 (Strong Buy) rating. STKS trades at just 9.3x forward earnings, a compelling valuation for a company expected to grow EPS at a 20% annual clip over the next three to five years.

Technically, the chart looks extremely promising. STKS has spent the beginning of the year building a solid base and has already broken out twice, forming a stair-step pattern higher. Currently, it appears to be carving out a bullish continuation pattern. As long as the stock holds above the $4.70 support level and clears resistance at $5.13, it could be poised for a powerful rally as the market re-rates this underappreciated small-cap growth story.

Image Source: TradingView

Legacy Education Inc.: Stock Forming a Bull Flag

Legacy Education Inc. operates in the growing field of healthcare education and workforce development, with a focus on training programs for high-demand medical roles. As a provider of healthcare training, Legacy benefits from a steady stream of demand, even in slower economic cycles, making it a somewhat recession-resistant growth play.

The company is showing strong momentum on both the earnings and technical front. It currently holds a Zacks Rank #2 (Buy) and trades at a reasonable 17.1x forward earnings, offering an appealing valuation for a business with this growth profile. Analysts expect sales to rise 37.9% this year and another 16.9% in 2026, reflecting very impressive growth expectations.

I highlighted LGCY stock a couple of weeks ago, and it has since broken out to new record high prices. Following the breakout, it has begun to form a compelling technical bull flag, a continuation setup that, if confirmed with a move above the $11 level, could trigger another leg higher.

Image Source: TradingView

Should Investors Buy Shares in LGCY and STKS?

With the broader market returning to a risk-on footing and small-cap stocks starting to show signs of life, The ONE Group Hospitality and Legacy Education Inc. stand out as compelling opportunities. Both companies are backed by strong earnings growth forecasts, reasonable valuations, improving technical setups, and rising analyst sentiment.

For investors looking to uncover under-the-radar growth stories with breakout potential, both of these small-cap names deserve a close look. If the charts confirm their next leg higher, STKS and LGCY could be among the early leaders in a broader small-cap resurgence.