During times of economic recovery, small-cap stocks tend to outperform their large-cap counterparts. So, as the United States’ economic recovery gains steam, small cap stocks have, not surprisingly, been making a solid comeback on the back of rising consumer spending and easy access to capital. Also, several small- and medium-sized businesses (SMBs) have been receiving substantial government support in the form of tax deferrals and subsidies. And the $1,400 recovery checks that have been awarded by the government to millions of U.S. households are driving an increase in consumer spending and a consequent increase in demand for these companies’ products and services.
Investors’ growing interest in the small-cap stocks is evident in the Vanguard Small-Cap Index Fund ETF’s (VB) 13.7% gains and the SPDR S&P 600 Small Cap ETF’s (SLY) close to 21% returns so far this year. These returns compare to the 11.2% gains of the large-cap focused SPDR S&P 500 ETF Trust (SPY).
So, investors that are seeking to capitalize on the economic recovery and have higher-than-average risk appetites should invest in PRGX Global, Inc. (PRGX), Core Molding Technologies, Inc. (CMT), and Evolving Systems, Inc. (EVOL). We think their strong financials and growth prospects should help these small-cap stocks advance in the coming months.
PRGX Global, Inc. (PRGX)
With great experience and expertise in the data analysis field, PRGX is well positioned to help its clients improve performance across all areas in Source-to-Pay processes. The company provides recovery audit services to businesses and government agencies that have payment transactions and procurement processes. It has a $181.66 million market capitalization.
PRGX’s adjusted EBITDA came in at $346.80 million for its fiscal year 2021 first quarter, (ended March 31, 2021). This represents a 199.8% year-over-year rise. Its operating loss improved by 34.6% year-over-year to $212.90 million. The company’s net loss improved 8.4% year-over-year to $388.30 million. The stock closed yesterday’s trading session at $7.71.
It’s no surprise that PRGX has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth, and B grade for Sentiment, Quality and value. Click here to see PRGX’s ratings for Stability and Momentum as well.
PRGX is ranked #1 of 51 stocks in the B-rated Outsourcing – Business Services industry.
Core Molding Technologies, Inc. (CMT)
With a $99.34 million market capitalization, CMT is engaged in the molding of thermoplastic and thermoset structural products. The company operates through two segments—manufacturing of SMC and fiberglass reinforced plastics molding. It produces and sells SMC and molded products for various markets, including medium- and heavy-duty trucks, automobiles, marine, construction and other commercial markets.
For its fiscal year 2020 fourth quarter, ended December 31, CMT’s net sales were $60.70 million, representing an 8.2% year-over-year increase. The company’s 16.4% gross margin for the quarter compared to 6% in the prior-year period. Its operating income was $3 million, up 173.2% year-over-year. Its net loss declined by 83.6% year-over-year to $0.90 million. The stock has rallied 386.3% over the past year and closed yesterday’s trading session at $11.72.
CMT’s POWR Ratings reflect this promising outlook. The stock has an A overall rating, which equates to Strong Buy in our POWR Ratings system. It has an A grade for Value, and a B grade for Growth, Sentiment, Quality and Momentum. In addition to these ratings, one can see CMT’s rating for Stability here.
CMT is ranked #3 of 45 stocks in the A-rated Industrial-Manufacturing industry.
Evolving Systems, Inc. (EVOL)
EVOL is a provider of software solutions for service enablement, on-device activation and management of services for connected devices for network operators. It has a $24.88 million market capitalization. The company operates through two segments—license fees and services revenue, and customer support revenue.
The company’s $7 million in net sales for its fiscal year 2020 fourth quarter, ended December 31, represents a 4.2% year-over-year rise. Its operating income has increased 400% year-over-year to $0.50 million. EVOL’s net income for the quarter came in at $0.60 million, up 142.9% year-over-year. Its adjusted EBITDA increased 100% year-over-year to $0.80 million. The stock has gained 107.4% over the past year and closed yesterday’s trading session at $2.03.
EVOL’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Value and Quality, and a B grade for Growth and Sentiment. Click here to see the additional POWR Ratings for EVOL (Stability and Momentum).
EVOL is ranked #5 of 122 stocks in the Software- Application industry.
Click here to check out our Software Industry Report for 2021
PRGX shares were trading at $7.71 per share on Wednesday afternoon, up $0.01 (+0.13%). Year-to-date, PRGX has gained 1.05%, versus a 11.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand.
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