Wall Street’s nightmare continues with almost no end in sight as the coronavirus-induced crisis refuses to let up. The stock market’s free fall, which has been the case in the last four weeks, persists with the three major indexes recording new closing lows almost every day. While the market is already oversold, lack of any positive news on the treatment front is resulting in panic selling, which has put stock valuation to almost trough.
However, despite this massive market mayhem, some small-cap stocks with strong growth potential for 2020, have witnessed upward earnings per share (EPS) estimate revisions for 2020 in the last 30 days.
Major Indexes Might Bottom Out
On Mar 23, three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — fell 3%, 2.9% and 0.3%, respectively. Year to date, these indexes are down, 34.9%, 30.8% and 23.5%. The 30 stock blue-chip index closed at 18,591.93 — its lowest reading since Nov 9, 2016, the day of Donald Trump was elected as the President.
Moreover, the Dow, the S&P 500 and the Nasdaq Composite — plunged 36.8%, 34.1% and 30.3%, respectively, from their all-times highs achieved in mid-February. Moreover, the Dow and the S&P 500 are presently well below their 2018-end levels while the tech-laden Nasdaq is ahead of that level by meager 8.3%. Notably, in 2018, these indexes recorded their worst ever yearly performance since 2008. This indicates that the market is no longer overvalued despite the likely volatility in the next few weeks.
Domestic-Focused Nature of Small Businesses
Owing to their predominantly domestic-focused business strategy, small business organizations are generally immune to any external shocks. In fact, the U.S. economy was stable with a robust labor market, strong corporate and personal income and solid consumer confidence at the beginning of the coronavirus-induced turmoil.
Further, with the recovery of global economic growth still uncertain, market participants are increasingly seeking safe-haven assets like U.S. dollar-denominated assets. Consequently, price of the U.S. Dollar index (DXY) skyrocketed to 102.49 — its highest since 2002. This renders U.S. exports uncompetitive internationally. However, as small business organizations primarily depend on domestic market, adverse movement of foreign-exchange rate does not hurt them.
Upward Revision of EPS Estimates
An upward EPS estimate revision for 2020 of any stock simply means the market is expecting these companies to do good business this year. However, in the past 30 days the coronavirus pandemic has become a serious threat to the global economy including the United States. This resulted in most stocks witnessing either negative EPS revisions or remains the same.
However, a positive EPS estimate revision during the period of historic financial turmoil indicates the solid business model and robust growth potential of these companies. Certainly, investors can take a look at this stocks at the moment.
Our Top Picks
We have narrowed down our search to five small-cap (market capital < 1 billion) stocks with Growth Score A. Each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Tennant Co. TNC designs, manufactures and markets floor cleaning equipment in the Americas, Europe, the Middle East, Africa and the Asia Pacific. It also provides business solutions, such as financing, rental, and leasing programs and machine-to-machine asset management solutions. The company has an expected earnings growth rate of 40.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 13.7% over the past 30 days.
eXp World Holdings Inc. EXPI provides cloud-based real estate brokerage services for residential real estate market in the United States and Canada. It facilitates buyers to search real-time property listings and sellers to list their properties through its website, exprealty.com, and provides buyers and sellers access to a network of professional, agents and brokers. The company has an expected earnings growth rate of 106.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 112.5% over the past 30 days.
James River Group Holdings Ltd. JRVR is an insurance company which owns and operates specialty insurance and reinsurance provider in the United States. It operates through Excess and Surplus Lines, Specialty Admitted Insurance and Casualty Reinsurance segments. The company has an expected earnings growth rate of 46.4% for the current year. The Zacks Consensus Estimate for the current year has improved by 1% over the past 30 days.
Cornerstone Building Brands Inc. CNR designs, engineers, manufactures and markets external building products for the commercial, residential and repair and remodel construction markets in North America. It operates through three segments: Commercial, Siding and Windows. The company has an expected earnings growth rate of 46.2% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.6% over the past 30 days.
Forterra Inc. FRTA manufactures and sells pipe and precast products the United States, Canada and Mexico. It operates through Drainage Pipe & Products and Water Pipe & Products segments. The company has an expected earnings growth rate of 866.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 19% over the past 30 days.
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