Small-cap stocks to buy is our topic for today. Such companies typically have a market capitalization (cap) of $300 million to $2 billion. Seasoned investors allocate a portion of their long-term portfolios to small-caps as these names have the potential to grow significantly.
Yes, sales figures at small-caps typically come under pressure during inflationary periods. In addition, they may see margin concerns. In fact, 2022 has so far proved a difficult year form many small-cap shares in the U.S.
For instance, the closely followed gauge of small-cap stock performance, the Russell 2000 index has lost over 18% of its value year-to-date (YTD). As a result of the turbulence on Wall Street, a large number of investors are now looking at the iShares Russell 2000 ETF (NYSEARCA:IWM), which offers better value for investing in a basket of small-cap securities.
But investing in funds may not appeal to everyone. For those readers, here are the three small-cap growth stocks to buy in the final months of the year. Interested investors should do further due diligence to narrow down the vast universe of small-cap stocks to buy.
| PLCE | Children’s Place | $35.45 |
| MVIS | MicroVision | $4.31 |
| NEX | NexTier Oilfield Solutions | $9.00 |
Children’s Place (PLCE)
52-week range: $36.97 – $113.50
Children’s Place (NASDAQ:PLCE) is a specialty retailer focusing on children’s apparel. It operates under several brands, including The Children’s Place, Gymboree and Sugar & Jade. Previous quarters have seen Children’s Place allocate resources to its e-commerce strategy. It has a market capitalization (cap) of close to $600 million.
The retailer reported second-quarter results on Aug. 17. Net sales came in at $380.9 million, down 8% year-over-year (YOY). Adjusted loss per share was 89 cents.
Wall Street raised eyebrows at the declining revenue and margin compression at Children’s Place. Management highlighted the pressure due to “The combination of an unexpected and meaningful increase in promotional activity from our key competitors and the widely reported inflation-driven consumer slowdown.”
Yet, recent research suggests that between 2022 and 20227, the global children’s wear market should expand a compound annual growth rate (CAGR) of over 5%. As a result, segment revenues could exceed $260 billion. Therefore, going forward, long-term Children’s Place investors are likely to see improvement in fundamental metrics, especially after current economic uncertainties end.
PLCE stock is down about 56% YTD. Shares offer value at 6.12 times forward earnings and 0.33 times sales. Meanwhile, the 12-month median price forecast for PLCE stands at $55.50.
MicroVision (MVIS)
52-week range: $2.50 – $16.38
MicroVision (NASDAQ:MVIS) develops a scanning technology under the PicoP brand. The company’s products are used in augmented/mixed reality and lidar technology for consumer electronics as well as automotive systems. Its market cap stands shy of 4750 million.
On July 28, MicroVision announced Q2 results. Revenue came in at $0.3 million, compared to $0.7 million a year ago. Net loss stood at 8 cents per share, down from a net loss of 9 cents a year ago. Cash and equivalents ended the quarter with $92.9 million.
Regular InvestorPlace.com readers may remember that MVIS stock was one of the closely-watched meme stocks of 2021. Similarly, over the past four months, shares have moved up significantly without much fundamental news. In mid-May MicroVision hit a 52-week low of $2.5. By early August, it was close to $6.0, and is now hovering at $4.6.
Yet, long-term shareholders hope to see MicroVision shares create value through partnerships or product sales, such as the one it has with Microsoft (NASDAQ:MSFT). During the Q2 earnings call management reported, “We recognized $314,000 in royalty revenue from Microsoft… [T]his revenue is attributable to the contract executed in April 2017, with Microsoft for using our technology in their AR display product.”
MVIS stock has declined 21% since January. Wall Street’s 12-month median price forecast is at $5. Those investors whose portfolios can handle the risk/return profile of a volatile stock like MVIS could consider putting it on their radar screens.
NexTier Oilfield Solutions (NEX)
52-week range: $3.06 – $12.50
NexTier Oilfield Solutions (NYSE:NEX) is a land oilfield-focused service company. It offers a diverse set of production services and well completion across various basins in the U.S. With a market cap of around $2.2 billion, it is a small-cap energy stock.
On July 26, NexTier reported Q2 financial results. Revenue was $842.9 million, up 189% YOY. Adjusted net income came in at $98.5 million, or 39 cents per diluted share, compared to an adjusted net loss of $41.7 million in the year-ago period. Free cash flow stood at $67.4 million at quarter end.
The company ended Q2 with a total liquidity of $492.4 million. Management now expects improved profitability and sequential revenue growth of 8-10% in Q3. Meanwhile, free cash flow could exceed $225 million in 2022.
NEX shares have soared more than 130% since January. Forward P/E and P/S ratios stand at 5,32x and 0.99x, respectively. Analysts’ 12-month median price forecast for the stock is $15.00.
On the date of publication, Tezcan Gecgil, Ph.D., did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.