BZH - 3 Small-Cap Stocks That Can Deliver Big Gains by 2026
2024-07-15 13:29:40 ET
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Large-cap stocks regularly capture headlines. These corporations have delivered exceptional returns for many years and are in popular indices like the S&P 500 and the Nasdaq Composite . However, every large-cap stock started as a much smaller version of itself. Some mega-cap firms used to trade as penny stocks. While these companies had less clout during their penny stock days, they have gone on to reward long-term investors.
Some investors look for small-cap stocks that can deliver robust long-term returns. Picking the right small-cap stocks can lead to substantial gains, but there’s also more risk with this path. Small-cap stocks don’t receive as much coverage, so you’ll have to dig through more earnings reports to see if a stock presents a good buying opportunity. Investors will also have to review press releases and gain a deeper understanding of the underlying business model.
Some opportunities exist for long-term investors. These three small-cap stocks are worth monitoring for big gains.
Beazer Homes (BZH)
Beazer Homes (NYSE: BZH ) is a home construction company based in Atlanta, Georgia. Shares have almost tripled in the past five years, and the company only trades at a 6 P/E ratio. It also has a market cap just shy of $1 billion.
The prospects of lower interest rates can stimulate more business. The company is still doing well without that catalyst. Net income from continuing operations came to $39.2 million in Q2 FY24 compared to $34.7 million in the same quarter last year. That’s a 13% year-over-year (YOY) increase. Homebuilding revenue was roughly flat YOY and came in at $538.6 million.
Beazer Homes closed out the quarter with $432.9 million in available liquidity. The Russell 2000 member has been down for most of the year but is up 10% over the past month. The company offers a reasonable valuation, solid financials and a growing opportunity amid prospects of future rate cuts.
Sezzle (SEZL)
Sezzle (NASDAQ: SEZL ) is a buy now pay later software that allows consumers to break their purchases into four installments. Sezzle has no-interest payment plans available if you quickly pay off the debt. Interest rates vary from 5.99% to 34.99% APR for terms ranging from 3 to 48 months, depending on a consumer’s creditworthiness.
The fintech firm has been on the upswing, more than quadrupling in value so far this year. The stock has a market cap of roughly $500 million and a P/E ratio approaching 40. Sezzle is growing at a robust pace, and the Q1 2024 earnings report highlights the company’s acceleration.
Revenue, denoted as total income, grew by 35.5% YOY. The company also reported $8.0 million in GAAP net income, a 364% YOY improvement. Sezzle anticipates FY24 net income to reach $30.0 million. It’s a 50% jump from last quarter’s guidance and makes the company’s forward P/E ratio quite attractive. A $30 million profit for a $500 million corporation adds up to 17 forward P/E ratio.
Dave (DAVE)
Dave (NASDAQ: DAVE ) is a fintech app released in 2017 to level the financial playing field. The app has several features that help it stand out from traditional banks, such as no overdraft fees and the ability to borrow up to $500 at 0% APR,
The company is off to a great start this year after imploding as a SPAC. DAVE shares are up by 357% year-to-date. The company has a $460 million market cap and has reported some profitable quarters. As profits become more common, Dave should scale up its net income and deliver higher profit margins for investors.
Dave generated $74 million in Q1 2024 which is 25% higher than the same quarter last year. The firm maintained its guidance of GAAP revenue ranging from $305 million to $325 million in fiscal 2024. Those figures represent an annual growth rate that will range from 18% to 25%. Dave also closed the quarter with 10.8 million members.
On this date of publication, Marc Guberti held a long position in SEZL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.
More From InvestorPlace
The post 3 Small-Cap Stocks That Can Deliver Big Gains by 2026 appeared first on InvestorPlace .