Chicago, IL – July 20, 2022 – Today, Zacks Investment Ideas feature highlights Covenant Logistics Group CVLG, BayCom Corp. BCML and Mercer International MERC.
3 Top-Ranked Small-Caps Up Double-Digits in 2022
Large-cap stocks are a staple in every portfolio. They're typically well-established in nature and carry a much lower level of risk, undoubtedly significant perks that make them so beloved.
However, large-cap stocks generally don't enjoy amplified growth anymore due to their size, leaving them ill-suited for investors willing to take on an added layer of risk in exchange for explosive gains.
That's where small-cap stocks come in. Small-cap stocks have much higher growth potential but also come with a much higher level of risk and volatility. Simply put, they're a double-edged sword.
Three small-cap stocks – Covenant Logistics Group, BayCom Corp. and Mercer International – have all crushed the S&P 500's return year-to-date, as illustrated in the chart below.
In addition, all three companies sport the highly-coveted Zacks Rank #1 (Strong Buy), making the shares appear even more appealing.
Let's look at each company a little closer to see why they would be solid bets for investors who have no issue taking on a higher level of volatility in exchange for higher growth potential.
Covenant Logistics Group
Covenant Logistics offers a portfolio of transportation and logistics services through its subsidiaries and resides within the Zacks Transportation – Truck Industry.
CVLG has been on an impressive earnings streak; the company has chained together eight consecutive bottom-line beats and seven consecutive top-line beats.
In its latest quarter, CVLG crushed the Zacks Consensus EPS Estimate by a double-digit 57% and reported quarterly earnings of $1.35 per share.
The company also sports solid valuation metrics, further displayed by its Style Score of A for Value. Its forward 12-month P/E ratio sits at 7.5X, well beneath its five-year median of 9.8X and nowhere near highs of 31.9X in 2018.
In addition, the value represents a steep 54% discount relative to the S&P 500.
Top and bottom-line estimates for the current fiscal year are solid – earnings are forecasted to climb a double-digit 27%, and annual revenue is estimated to soar 11% year-over-year.
BayCom Corp.
BayCom Corp., formerly known as Bay Commercial Bank, provides commercial banking products and services to businesses and individuals. BCML resides in the Zacks Banks – West Industry.
BayCom has recently found consistency within its bottom-line, exceeding earnings expectations in three of its previous four quarterly reports.
The top-line has provided consistency as well; BCML has topped quarterly revenue estimates in four consecutive quarters. In addition, the company posted a double-digit 41% bottom-line beat in its latest quarter.
The company's forward 12-month P/E ratio resides at 8.4X, nicely below its five-year median of 10.1X and a fraction of its 15.3X high in 2018. Furthermore, the value represents a deep 48% discount relative to the S&P 500.
Growth estimates are inspiring – for the current fiscal year, earnings are forecasted to soar 23% year-over-year from FY21. Pivoting to the top-line, the annual revenue estimate of $106 million pencils in a 27% uptick in revenue year-over-year.
Mercer International
Mercer International owns and operates a diverse pulp and paper business in south Germany. The company resides within the Zacks Paper and Related Products Industry.
Mercer has reported bottom-line results above expectations consistently as of late, posting three consecutive EPS beats. Impressively, the company posted a substantial 23% bottom-line beat in its latest quarter.
In addition, the company has rock-solid valuation levels, further displayed by its Style Score of an A for Value. MERC's forward 12-month P/E ratio is 4.6X, representing a sizable 72% discount relative to the S&P 500.
For the current fiscal year, the Zacks Consensus EPS Estimate resides at $1.06, reflecting a strong double-digit increase in earnings of 47% year-over-year.
The company's dividend metrics are worth a highlight as well. MERC's annual dividend yields 2.1%, well above that of the S&P 500. In addition, the company has increased its dividend four times over the past five years – undoubtedly a highlight.
Bottom Line
Small-cap companies carry an extra level of risk but also have higher growth potential. It's vital for investors to know of the high volatility nature that these stocks carry.
All three stocks have crushed the S&P 500 year-to-date, undoubtedly a bright spot in an otherwise dim market. In addition, all three companies sport the highly-coveted Zacks Rank #1 (Strong Buy), instilling more confidence in share appreciation moving forward.
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