8 Small-Cap Stocks Ripe for Solid Growth in 2019 in 2019

8 Small-Cap Stocks Ripe for Solid Growth in 2019Posted on Thursday, January 17th, 2019 by Chris Markoch

For many investors, the mantra “no risk, no reward” can apply to their decision of whether they choose to add small-cap stocks to their portfolio. Small-cap stocks are a class of stocks that showcase stocks that have an average market cap of between $500 million and $2 billion dollars. These stocks don't have some of the big names of stocks like Amazon or Apple, but the attraction to these stocks is that they can rise to that level. With 2019 just a couple of weeks old, the Russell 2000 Index, considered the standard mutual fund for small-cap stocks was up 9%. This, however, followed a double-digit loss in 2018.

Small-cap stocks have posted annual gains of over 12% from 1926-2017, a rate of growth that outpaces large stocks which have grown just over 10% over the same period. Small-cap stocks deliver this growth for several reasons including the ability of these stocks to provide diversification that can help investors experience growth when other stocks are sagging. These stocks also are typically U.S. companies which limit an investor's exposure to the volatility of international markets. Closer to home, these companies will be among the best positioned to benefit from the Trump tax cuts with small-cap companies expected to receive 5% more from the tax cuts than larger companies. And finally, small-cap stocks are less affected by the potential of a strong dollar. So however interest rate policy moves, these stocks should be able to be strong performers.

In this slide show, we’ve identified 8 small-cap stocks that are poised for solid growth in 2019. These stocks are all riding the wave of the current rally and have fundamentals in place that offer investors a good value.

#1 - Blackline (NASDAQ:BL)

Blackline logo

Blackline (NASDAQ: BL) - Cloud computing continues to be one of the hot trends in the software industry, but that doesn’t mean the stocks are immune to the volatility that the rest of the market is experiencing. Stocks, such as Blackline (BL) have been punished lately, but where other SaaS companies have a higher profile, Blackline may be better positioned for growth. Blackline excels at generating revenue through a recurring subscription base that numbers in the thousands. What’s better still, that customer base is actually spending more while continuing to add new customers. As an investor, this means that the company is poised to deliver consistent financial results. In the last quarter, they posted an impressive 29% growth in revenue. Blackline’s management is estimating their current market is in excess of $18 billion compared to the $227 million it is estimated to generate in 2019. The company was recognized by Software Magazine as the seventh largest SaaS (Software-as-a-Service) providers. This is the eighth year in a row that the company has achieved this rank. The stock is currently trading slightly below the midpoint of its 52-week high and low. Current analyst rankings have the stock listed as a Moderate Buy. The company will deliver their fourth-quarter earnings report on February 14, 2019.

About Blackline
BlackLine, Inc. provides financial accounting close solutions delivered primarily as Software as a Service in the United States and internationally. Its solutions enable its customers to address various aspects of their financial closing process, including account reconciliations, variance analysis of account balances, journal entry capabilities, and range of data matching capabilities. The company's platform consists of nine core cloud-based products, including Transaction Matching, Account Reconciliations, Consolidation Integrity Manager, Daily Reconciliations, Journal Entry, Variance Analysis, Task Management, Compliance, and Insights. Its solutions include balance sheet integrity, close process management, accounting process automation, finance transformation, intercompany hub, and smart close. The company designs its products to complement enterprise resource planning and other financial systems, including NetSuite, Oracle, SAP, and Workday; and financial close management and accounting automation from within a single, unified cloud platform. It has strategic alliances with technology vendors, such as SAP and NetSuite; professional services firms, including Deloitte, Ernst & Young, and KPMG; and business process outsourcers, such as Cognizant, Genpact, and IBM. The company sells its solutions primarily through direct sales force to multinational corporations, large domestic enterprises and mid-market companies across various industries. The company was founded in 2001 and is headquartered in Woodland Hills, California.

Current Price: $48.64
Consensus Rating: Buy
Ratings Breakdown: 3 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $54.6667 (12.4% Upside)

#2 - ANI Pharmaceuticals (NASDAQ:ANIP)

ANI Pharmaceuticals logo

ANI Pharmaceuticals (NASDAQ: ANIP) - ANI Pharmaceuticals has a lot going in its favor. ANIP is known for developing a growing number of generic and branded therapies. Since 2014, the company has more than quadrupled the number of products it has on the market and in the process has also increased its revenue from $56 million to over $200 million in 2018. However, while revenue can be a misleading indicator, it's hard to ignore the company's corresponding growth in EBITDA (earnings before interest, taxes, depreciation, and amortization). And with an annual market size of $3.3 billion, it's easy to see why the company is poised for growth in 2019 and beyond. In fact, despite the 20% drop in their stock price in the trailing year, they are projecting annual earnings growth between 10-15% between now and 2021. The company has a P/E ratio that is under 10 and is currently trading solidly between its 52-week high and low.

About ANI Pharmaceuticals
ANI Pharmaceuticals, Inc., a specialty pharmaceutical company, develops, manufactures, and markets branded and generic prescription pharmaceuticals in the United States and Canada. It focuses on producing controlled substances, oncolytics (anti-cancers), hormones and steroids, and other formulations. The company manufactures oral solid dose products; semi-solids, liquids, and topicals; controlled substances; and potent products, as well as performs contract manufacturing for other pharmaceutical companies. It markets its products through retail pharmacy chains, wholesalers, distributors and mail order pharmacies, and group purchasing organizations. The company was founded in 2001 and is headquartered in Baudette, Minnesota.

Current Price: $69.66
Consensus Rating: Buy
Ratings Breakdown: 3 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $72.3333 (3.8% Upside)

#3 - Axos Financial (NYSE:AX)

Axos Financial logo

Axos Financial (NYSE: AX) - One of the tenets of solid fundamental investing is to find small companies that are primed for rapid growth. That would seem to define the situation surrounding Axos Financial. The company, formerly named Bank of Internet USA has been busy acquiring Nationwide's deposit base and is also investing in their Universal Digital Bank (UDB) initiative which is putting all of its products and services on a single platform that will allow the company to have more cross-selling opportunities to its customers. Investors can also celebrate a business model that keeps costs low when compared to traditional brick-and-mortar banks. Case in point, in their most recent quarter Axos, generated a 15% return on equity (ROE), easily exceeding the industry average of 10%. Axos is still a small company ($10 billion in assets), but they are showing signs of rapid growth. In the last year, their net income has increased by almost 14% and their loan portfolio is up over 15%. The stock is trading towards the lower half of their 52-week range and has received a strong buy rating by analysts.

About Axos Financial
Axos Financial, Inc. operates as the holding company for BofI Federal Bank that provides consumer and business banking products in the United States. The company offers deposits products, including consumer and business checking, demand, savings, and time deposit accounts. It also provides single family and multifamily mortgage secured lending products; commercial real estate secured and commercial lending products; specialty finance factoring products; prime loans to customers secured by new and used automobiles; and term unsecured personal loans to individual borrowers, as well as overdraft lines of credit. In addition, the company offers prepaid card and refund transfer, debit card or ATM card, portfolio management, online bill payment, money transfer, overdraft protection, online and mobile banking, and text message banking services. The company was formerly known as BofI Holding, Inc. and changed its name to Axos Financial, Inc. in September 2018. Axos Financial, Inc. was incorporated in 1999 and is based in San Diego, California.

Current Price: $31.84
Consensus Rating: Buy
Ratings Breakdown: 5 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $41.20 (29.4% Upside)

#4 - Green Dot Corp. (NYSE:GDOT)

Green Dot logo

Green Dot Corp. (NYSE: GDOT) - Banking as a service (BaaS) is another industry that is redefining how companies relate to their customers. Green Dot is not a name that consumers would easily recognize, but companies like Apple, Wal-Mart, and Uber are, and Green Dot provides products for them. And one of their key initiatives is their BaaS initiatives that allow these companies to provide person-to-person payment apps and company-branded payment cards. Apple Pay Cash uses Green Dot for their person-to-person payment platform as does Wal-Mart with their MoneyCard prepaid MasterCard. Uber also uses the company’s products for their instant Pay application. This is looking like the tip of the iceberg for Green Dot which has seen its share price increase by nearly 28% in 2018 which easily outperformed the broader market and the company is generating significant profit from that revenue. The stock is currently trading in the higher range of its 52-week average and is a Moderate Buy according to many analysts. Guidance on the company shows increasing revenue and earnings per share (EPS).

About Green Dot
Green Dot Corporation operates as a financial technology and bank holding company in the United States. It operates in two segments, Account Services, and Processing and Settlement Services. The company offers deposit account programs, such network-branded reloadable prepaid debit cards under the consumer brand names of GPR cards, consumer and small business checking accounts, network-branded gift cards, secured credit cards, and other financial services. It also provides swipe reload system for crediting cash onto an enabled payment card by swiping the payment card at the point-of-sale through Green Dot Network participating retailer; MoneyPak, a product that allows a consumer to add funds to accounts; and e-cash remittance, a service that allows a consumer to transfer funds to a smartphone, as well as offers disbursement services through Simply Paid platform. In addition, the company offers prepaid cards, debit cards, payroll debit cards, consumer cash processing services, wage disbursements, and tax refund processing services, as well as issuing, settlement, and capital management services. Further, it provides mobile banking, loan disbursement accounts, mobile P2P, money transfer, instant payment, and processing and settlement services. The company markets its products under the brand names of Green Dot, GoBank, MoneyPak, AccountNow, RushCard, and RapidPay. Green Dot Corporation markets and sells its products and services through retail stores, various direct-to-consumer Websites, corporate distribution partnerships, tax preparation companies and individual tax preparers, and apps, as well as distributes through ‘Banking as a Service' platform. The company was formerly known as Next Estate Communications, Inc. and changed its name to Green Dot Corporation in October 2005. Green Dot Corporation was incorporated in 1999 and is headquartered in Pasadena, California.

Current Price: $63.00
Consensus Rating: Buy
Ratings Breakdown: 11 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $92.4615 (46.8% Upside)

#5 - BJ’s Restaurants, Inc. (NASDAQ:BJRI)


BJ’s Restaurants, Inc. (NASDAQ: BJRI) - Despite the up-and-down movement in the market, 2018 was a great year for the restaurant industry. Many companies delivered strong earnings and BJ’s Restaurants is a good example. BJRI is becoming the apple of value investors’ eye, and it’s not hard to see why. The company saw stock growth of 53% for the year, and one of the primary reasons for that is an increase in foot traffic that saw same-store sales go from a negative -1.4% to a positive 4.9%. The company operates both regular restaurants (called BJ's Restaurant & Brewhouse) and specialty restaurants that include breweries (BJ's Restaurant & Brewery). The company is not just competing, but thriving, in the tough casual dining segment. To help illustrate this, the company beat analysts' expectations for a top and bottom line growth in the third quarter. Moving into 2019, the company has said it will not be opening as many new stores, but will instead be focused on improving operations at their current locations including the potential to deliver innovative new menu items.

About BJ's Restaurants
BJ's Restaurants, Inc. owns and operates casual dining restaurants in the United States. Its restaurants offer pizzas, craft and other beers, appetizers, entrées, pastas, sandwiches, specialty salads, and desserts. As of April 2, 2019, the company owned and operated 202 casual dining restaurants that offer dine-in, take-out, delivery, and party catering services in 27 states of Alabama, Arizona, Arkansas, California, Colorado, Florida, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia, and Washington. BJ's Restaurants, Inc. was founded in 1978 and is based in Huntington Beach, California.

Current Price: $48.15
Consensus Rating: Hold
Ratings Breakdown: 6 Buy Ratings, 3 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $65.20 (35.4% Upside)

#6 - H.B. Fuller Company (NYSE:FUL)

HB Fuller logo

H.B. Fuller Company (NYSE: FUL) - When looking for diamonds in the rough, value investors could do worse than look at a company like H.B. Fuller. You have to overlook metrics such as its industry rank which is in the bottom 13% of 250 industries, and recent consensus estimates have been negative on the stock. But from a value perspective, the stock scores on several metrics such as a PEG ratio of 0.9 which is just below the industry average of 1.6. Moving forward into 2020, the company is projecting annual organic growth of 4.5% as it has announced plans to shift its focus to products that service their markets that offer the highest margin and the highest potential for growth. With this shift, the company is forecasting revenue that exceeds $3 billion (as opposed to $2.3 billion in 2017) and expects to retire nearly 25% of its outstanding debt. At that time, the company is expecting to have a market cap of, at a minimum, $5 billion, which would put it at nearly double of where it is today.

About HB Fuller
H.B. Fuller Company, together with its subsidiaries, formulates, manufactures, and markets adhesives, sealants, coatings, polymers, tapes, encapsulants, and other specialty chemical products worldwide. The company operates through five segments: Americas Adhesives, EIMEA, Asia Pacific, Construction Adhesives, and Engineering Adhesives. It produces and supplies industrial adhesives products for applications in various markets, including appliances, filters, and insulating glass; food and beverage containers, flexible packaging, consumer goods, package integrity and re-enforcement, and durable and non-durable goods; corrugation, folding carton, tape and label, paper converting, envelopes, books, multi-wall bags, sacks, and tissue and towel; nonwoven and hygiene, such as disposable diapers, feminine care, and medical garments; windows, doors, and wood flooring; and insulating glass and textile. The company also provides specialty adhesives, including thermoplastic, thermoset, reactive, water-based, and solvent-based products; and products used for tile setting, commercial roofing, heating, ventilation, and air conditioning and insulation applications, as well as caulks and sealants for the consumer market and professional trade. In addition, it produces and supplies high performance industrial adhesives to the transportation, electronics, medical, clean energy, aerospace and defense, appliance, and heavy machinery markets. The company sells its products directly through distributors and retailers. H.B. Fuller Company was founded in 1887 and is headquartered in Saint Paul, Minnesota.

Current Price: $47.67
Consensus Rating: Hold
Ratings Breakdown: 2 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $56.5580 (18.6% Upside)

#7 - Insperity Inc. (NYSE:NSP)

Insperity logo

Insperity Inc. (NYSE: NSP) - In contrast to H.B. Fuller that operates in one of the lower ranked sectors, Insperity is enjoying the growth in the professional employer organization (PEO) industry. As more companies are looking to outsource certain human resources functions, Insperity is well positioned to meet the demand with its Workforce Optimization and Workforce Synchronization solutions that help the company provide a comprehensive suite of solutions for small- and medium-size solutions. Last year, second-quarter revenues came in just below 16%, which beat first-quarter revenues by 1% and was nearly 4% higher than the same quarter in 2017. Although the company competes in a very competitive industry, the overall strength of the industry looks to be a good sign for Insperity which should continue to post strong revenue and earnings growth in 2019 and beyond. The stock is rated as a Moderate Buy and is currently trading at about the midpoint of its 52-week high and low.

About Insperity
Insperity, Inc. provides human resources (HR) and business solutions to enhance business performance for small and medium-sized businesses in the United States. The company offers its HR services through its Workforce Optimization and Workforce Synchronization solutions, which include a range of human resources functions, such as payroll and employment administration, employee benefits, workers' compensation, government compliance, performance management, and training and development services. It also provides Insperity Premier, a cloud-based human capital management platform that offers professional employer organization HR outsourcing solutions to its clients and worksite employees. In addition, the company offers Workforce Acceleration, an human capital management and payroll services solution; time and attendance; performance management; organizational planning; recruiting; employment screening; retirement; and insurance products and services. It provides its other business performance solutions through desktop applications and cloud-based delivery models. The company was formerly known as Administaff, Inc. and changed its name to Insperity, Inc. in March 2011. Insperity, Inc. was founded in 1986 and is headquartered in Houston, Texas.

Current Price: $121.66
Consensus Rating: Buy
Ratings Breakdown: 2 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $124.75 (2.5% Upside)

#8 - IRobot Corp. (NASDAQ:IRBT)

iRobot logo

IRobot Corp. (NASDAQ: IRBT) - Any investor who recently purchased IRBT would be welcoming the recent stock price surge of over 20%. However, for investors who jumped on the stock for the maker of the Roomba robotic home vacuum in 2017 that would only bring them back to even. Such is the nature of small-cap stocks. But many analysts still love what they are seeing with a product that is considered to be right up there with the iPhone as one of the most transformational consumer products in the last quarter century. The market for the robotic vacuum cleaners has grown from 13% of the global market in 2012 to over 23% of the market today. And of that market, iRobot commands an impressive 62% market share. This means that iRobot is the boat that stands to benefit from a rising tide. The stock is expensive both in its P/E ratio (40) and its price-to-cash flow (41). However, in late December 2018, the stock was rated as oversold which has helped fuel the recent bounce that has pushed the stock near the top end of its 52-week high and low. The stock has received a Moderate Buy consensus analyst rating.

About iRobot
iRobot Corporation designs, builds, and sells robots for the consumer market worldwide. It offers Roomba floor vacuuming robots; Braava family of automatic floor mopping robots; and Mirra Pool Cleaning Robot to clean residential pools and removes debris as small as two microns from pool floors, walls, and stairs. The company sells its robots through various distribution channels, including chain stores and other national retailers, as well as through online store, and value-added distributors and resellers. iRobot Corporation was founded in 1990 and is headquartered in Bedford, Massachusetts.

Current Price: $98.87
Consensus Rating: Hold
Ratings Breakdown: 1 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $114.1450 (15.4% Upside)

As investors look into the crystal ball for 2019, equities face many headwinds. Two of the major factors for investors to consider as they consider where to invest their money are the tax cuts which consumers will be feeling for the first time in their 2018 tax returns and the ongoing trade dispute between the U.S. and China. Both of those issues set the table nicely for small-cap stocks as we enter 2019.

Small-cap stocks, which are typically defined as companies that have a market cap of between $500 million and $2 billion, are among the most volatile in the industry, but they also have the benefit of significant gains that outstrip the rest of the industry. After all, simple math dictates that it's easier for a small company to double $1 million in revenue than it would be for a company to double its revenue from a base of $1 billion. As a case in point, the Russell 2000 Index, considered to be the leading small-cap index fund was down 12% over the last quarter of 2018 but has surged to a 9% gain for 2019, more than double the gain for the S&P 500 Index.

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