5 Small-Cap Stocks With Growth Potential

Top Small-Cap Stocks to Buy

Last Updated August 10th 2021
12 Min Read

As the economy continues its recovery, here are 5 small-cap stocks with growth potential that investors don't want to miss out on. 

Despite the market accelerating in 2021, Wall Street and investors across the globe have been very optimistic on small-cap stocks as these exciting assets have managed to maintain their successful run going into the second half of the year leading many to add one or two of these blossoming smaller assets to their growing portfolio. 

Historically small-cap stocks are known to outperform large-cap stocks within a bull market, or in simpler terms, small-cap stocks are in their prime at the start of an economic recovery. The Russell 2000 index has witnessed a good run over 2021 so far, with the index being up approximately 11.6% for the year, slightly trailing behind the leading S&P 500 index that has risen above 16% throughout the course of 2021.

But many analysts have forecast that the small-cap run may be slowing down due to the ongoing spread of the new delta variant and inflation implications which will see investors look to bigger stocks for more security to ride smoother through volatility rather than take risks with smaller stocks.

But the positive to keep hold of in this case is that right now looks to be an opportune time to buy these smaller growing assets whilst they sit at discounted prices and are still making their mark within their industries. 

On that note, here are our top 5 chosen small-cap stocks with growth potential that have been poised to continue to grow well by analysts through 2021 and beyond as the economy continues to ride the COVID-19 storm. 

5 Best Small-Cap Stocks With Growth Potential 

  1. Abercrombie & Fitch Company (ANF)
  2. BJ’s Restaurant Inc (BJRI)
  3. Inter Parfums Inc (IPAR)
  4. Allegiant Travel Company (ALGT) 
  5. Blink Charging Co (BLNK)

 

1. Abercrombie & Fitch Company (ANF) 

The American lifestyle retailer Abercrombie & Fitch Company (ANF) offers high-quality casual apparel wear for men, women and children and is made up of three additional brands: Hollister Co, Abercrombie Kids and Gilly Hicks. 

Within the stocks Q1 report, ANF confirmed that sales rose better than expected by 61% to $781.4 million year-over-year with digital sales rising by 52%. Both totals beat analysts' predictions respectively. But it was the stock’s Hollister brand that accounted for the biggest contribution contributing 57% towards total net sales. 

The results ANF witnessed in Q1 2021 have confirmed a rise of 6% from Q1 2019 including growing by 18% within the company’s biggest market, the US market. Off the back of such positive momentum, the company reported earnings of $0.67 cents per share, beating analysts' predicted earnings of a loss of $0.38 cents per share for the quarter.

Moving into the future, ANF is continuing to set its sights on profitability and is seeking to push its digital market to establish further growth as the world continues its swift move into the digital space. The company’s latest avenue, Social Tourist, who made a partnership with Tik Tok influencers Charli and Dixie D’Amelio contributed impressively to the brands net sales success and continues to be a main growth aspect looking ahead. 

Zacks Investment Research is expecting ANF stock to grow its earnings with an EPS growth rate of 18% over the coming 3-5 years, alongside giving the stock a consensus ‘Strong Buy’ rating. Based on 11 Wall Street analysts' predictions, ANF has been given an average price target of $50 moving forward, showing a 36% upside from where the stock sits today at $36.43. 

Abercrombie and Fitch is set to release its second-quarter results on August 26th 2021. 

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2. BJ’s Restaurants Inc (BJRI) 

BJ’s Restaurants Inc (BJRI) is an American restaurant chain, who like the rest of the hospitality industry across the globe witnessed a challenging run over the past year. But as the economy has started its recovery with restrictions starting to ease, BJRI stock is showing solid signs of improvement and it looks set to continue.

Within the company’s recent Q2 report, BJRI surpassed estimates to reach earnings of $0.26 per share, up from last year's $0.99 per share including beating analysts expectations of $0.16 for the quarter. This marks the third consecutive quarter that the stock has blown past estimates. 

Additionally, the company’s total revenue rose to $290.28 million for the quarter compared to $128.02 million, showing a 126.7% difference over the year making it the fourth consecutive quarter to reach top end estimates given by analysts. 

BJRI is looking to continue its growth momentum further into 2021 through its strong footfall, demand through the stock's digital channels and mobile app, alongside the stock’s evolving strategic plans. Analysts have granted BJRI with an average price target of $60.00, showing a 52.71% rise from today's price with earnings also expected to grow at a growth rate of 7.59% over the coming 3-5 year outlook, up from Zacks Quarter Estimate of $0.62 per share.

3. Inter Parfums Inc (IPAR) 

Inter Parfums Inc (IPAR) seeks to develop, manufacture and distribute bespoke perfumes and cosmetic products through its global network set across 120 countries worldwide that includes brands such as Abercrombie & Fitch, GUESS, Jimmy Choo and many more. 

Ahead of the stock’s recent quarter results that are due to be released on 9th August, analysts are further expecting this small-cap stock to show another earnings surprise as it has done so for the past four consecutive months with analysts expecting the stock to reach earnings of $0.55 per share within the next quarter. 

Within the stocks Q2 2021 report, IPAR has surpassed pre-pandemic levels as the company witnessed its sales soar to $207.6 million, a 24.9% rise compared to the stock's performance in pre-pandemic 2019. But it was the company’s European market that contributed the biggest impact rising by 28.3% in net sales within the quarter.

Inter Parfums is looking to continue its growth expansion with one of its latest partnerships with Italian luxury goods company Salvatore Ferragamo S.p.A. (SFER), in a deal that is set to close in October 2021. This agreement will see IPAR produce and distribute Ferragamo perfumes over a 10 year period, unless extended. Aside, the brand will no doubt add new product launches to the calendar including continuing its growth of the brand’s MCM fragrance product that has gained impressive results following its launch over recent weeks. 

In light of the stock's solid performance, IPAR has raised its full year 2021 net sales guidance to just below $700 million, subject to market conditions. Alongside, analysts are bullish on the stock giving IPAR an average price target of $90.00, showing a 13.32% rise from where it sits at $79.42 after witnessing a 0.74% gain at close of play on Friday ahead of its latest quarter report release date. 

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4. Allegiant Travel Company (ALGT) 

Typically small-cap stocks are known to hold a market capitalization of $2 billion or under, but just coming slightly above that bracket is Allegiant Travel Company (ALGT). 

Allegiant Travel Company (ALGT) is the parent company to Allegiant Air, an ultra-low cost airline which operates across North America. The company has shown clear signs of improvement during 2021 as global travel restrictions started to relax causing more individuals to seek to travel across the country leaving this stock to beat analysts expectations within Q2. 

Within the stock’s Q2 report, ALGT reported earnings of $3.46 (excluding COVID-19 related special charges and additional programs) which beat the Zacks Consensus Estimate of $2.96 for the quarter, and the company's earnings a year prior of a reported loss of $5.96 per share. 

Operating costs missed estimates slightly but the stock still managed an almost 100% growth year-over-year with the company reporting operating revenues of $472.4 million for the quarter. This stock's passenger revenues was the main contributor to the company’s revenue result with this sector witnessing an above 100% year-over-year growth confirming the surge in travel demand. 

In light of the results, ALGT’s liquidity status has been reported with total cash and investments for the end of June of $1.2 billion, up from $728 million from March 31st. Additionally, the stock has unrestricted cash and investments of $1,185.8 million compared to the end of December 2020 of $685.3 million. When you compare these results against the stocks debt levels, ALGT remains relatively flat from debt levels ending in 2020 of $1,441.1 million. 

This airline stock is optimistic that it will strengthen its position within the market as the months lead on with ALGT expecting growth capacity to increase by 20% YoY within Q3. Additionally, ALGT has signed partnership deals with various brands including Ticketmaster, Live Festivals and more to unlock leisure offerings and provide an all-in-one service, alongside the stock preparing its latest loyalty program, Always Rewards that is set to be launched over the coming months to help grow the brands consumer network.

Given an average price target of $260.00 by analysts, shows an 35.56% upside from where the stock sits today with earnings for Allegiant Travel expected to grow substantially over the year to $16.60 per share. All results ALGT has produced seem to be a good clear indication of the direction where this small stock is heading. 

5. Blink Charging Co (BLNK) 

As the world edges closer to a greener environment, the electric car market is growing and is growing quickly, poised to reach just under $40 billion by 2026 with the market almost gaining a 50% rise with the amount of electric vehicles hitting the roads in 2020 from 2019. So welcome Blink Charging Co (BLNK), an electronic services company who specialises in providing fast-charging stations across the globe. 

Blink currently has over 23,000 charging stations spread across the globe mixed between both commercial and residential. And according to a recent announcement, the company is continuing to grow by adding more charging stations across various states within the US and is continuing expanding its presence within the European market with the brands acquiring plans of Blue Corner, a leading charging ports operating company that holds over 7,000 stations across the European market. 

In 2020 Blink’s revenue grew by 121% over the course of the year to achieve revenue of $6.2 million compared to $2.8 million in 2019. But despite the rise in demand, the stock’s charging service was the company’s trailing sector as it decreased slightly to $0.8 million compared to $1.4 million in 2019 due to lack of EV’s getting charged due to the ongoing COVID-19 pandemic. 

Fast Forward to Q1 2021, Blink’s charging service sector is still trailing slightly behind whilst the world edges closer to normality, but the stock has managed to grow over 370% compared to Q1 2020 with first quarter revenue increasing by 72% over Q1 2020 to $2.2 million. 

Ahead of the stock's Q2 report that is due to be released on August 11th analysts are predicting an EPS of -$0.18 per share, a $0.07 change from the same period a year prior.

Despite high levels of competition and a loss in earnings predicted by analysts, Blink stock looks to be a standout small-cap electronic charging stock that is delivering and expanding on its growth potential that is pushing down new barriers and edging its way closer to positive territory. 

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