RWSL - Small-Cap Valuations: Historic Opportunity Or Overvalued?
By Matt Wagner, CFA, Senior Research Analyst
Small-cap valuations have a unique tendency to provoke debate. During highly uncertain and declining earnings backdrops, the divisiveness over this topic ramps up.
Differences in valuation techniques and market benchmarks are amplified in small caps because of the high percentage of companies with negative earnings. Conclusions that are drawn, and resulting actions that investors take, can make or break portfolios.
Investors may be rating small caps with historically optimistic valuations that will not be justified. On the other hand, small caps often outperform in the aftermath of