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These small-cap stocks are cheap and expected to do well from here
As the 2024 market rally broadens out, some small-cap stocks are poised to do better than others. This year’s bull run has been led by mega-cap technology titans such as Nvidia , up more than 140% in 2024. But with interest rate cuts on the horizon, the prospects for small-cap stocks have improved in recent weeks. The Russell 2000 small-cap index has already risen more than 6% in July alone. Against that backdrop, CNBC Pro screened for the small-cap stocks that could be poised for a boost. To be included in the basket, tickers had to have the following criteria: Market capitalization between $1 billion and $2 billion Forward price-to-earnings ratio less than the Russell 2000’s ratio of 25, per LSEG Average price target suggesting at least 10% upside and at least five analyst estimates Earnings per share growth of over 15% in the last three years One name on the list of promising small-cap stocks was Papa John’s International . Shares of the pizza chain retailer have slipped 46% this year, but consensus estimates suggest upside of 59% ahead. In April, Stifel upgraded the stock to a hold rating from sell. “We believe near-term expectations are reasonable, and given the stock’s negative sentiment and recent market volatility, we decided to move to the sidelines,” wrote analyst Chris O’Cull. His price target of $60 implies that shares could rally about 41% from their Thursday closing price. Wall Street also sees shares of fast-food chain Jack in the Box potentially rising 23%. Shares have plunged 35% year to date. RBC Capital Markets assumed coverage of the stock at an outperform rating in May. Analyst Logan Reich cited a compelling growth story combined with an attractive valuation as catalysts. “Positively, 1) new markets continue to perform well supporting [long-term] unit growth; 2) new menu items & digital innovation should drive [a same-store sales] inflection in 2H24 into 2025 and 3) valuation looks attractive at 22% below its 5-year average,” Reich wrote. Stock photography company Shutterstock was also included in the basket. Analyst consensus price targets imply about 41% upside. Shares are down nearly 16% on the year. Other names included renewable energy firm Canadian Solar , door manufacturer Janus International and distilled spirits producer MGP Ingredients . — CNBC’s Nick Wells contributed to this report.
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