Top Small-Cap Stocks for September 2022

JXN, HPK, and IVT are top for value, growth, and momentum, respectively

Small-cap stocks are public companies that have market capitalizations ranging from $300 million to $2 billion. Because the share prices of these companies can be very volatile, some companies in the small-cap universe (or in small-cap indexes) can have market caps significantly higher than this range at any particular time. Some of the stocks classified as small caps are insurance company Genworth Financial Inc. (GNW), printing and imaging company Eastman Kodak Co. (KODK), and retail drugstore chain Rite Aid Corp. (RAD).

Small-cap stocks, as represented by the Russell 2000 Index, have underperformed the broader market, providing investors with a total return of -12.2% compared to the Russell 1000's total return of -8.2% over the past 12 months. These market performance numbers and the statistics in the tables below are as of Aug. 24, 2022.

Here are the top three small-cap stocks with the best value, fastest growth, and most momentum. The market valuations of some of the companies listed below are above the generally agreed upper limit of $2 billion for a stock to be considered small-cap. This tends to happen in periods of higher volatility, especially for momentum stocks. However, they are still classified as small-cap because stocks are not re-indexed as rapidly as their price movement would dictate. Their valuations may drop later as volatility subsides.

Best Value Small-Cap Stocks

These are the small-cap stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you're paying less for each dollar of profit generated.

Best Value Small-Cap Stocks
  Price ($) Market Cap ($B) 12-Month Trailing P/E Ratio
Jackson Financial Inc. (JXN) 33.53 2.8 0.5
Sinclair Broadcast Group Inc. (SBGI) 23.59 1.6 0.7
Diversified Healthcare Trust (DHC) 1.65 0.4 1.0

Source: YCharts

  • Jackson Financial Inc.: Jackson Financial is a holding company that, through subsidiaries, offers annuities to retail investors across the U.S. Its subsidiaries include Jackson National Life Insurance Co., Jackson National Life Insurance Co. of New York, PPM America, and more. Jackson announced earnings results on Aug. 9 for Q2 2022. Net income attributable to the company was $2.9 billion compared to net loss for the prior-year quarter, and total revenues grew more than 28-fold year over year (YOY). Net income was attributable primarily to improved freestanding derivative results on equity hedges.
  • Sinclair Broadcast Group Inc.: Sinclair Broadcast Group is a diversified media company. It owns, operates, and provides services to television stations in a broad range of markets. It delivers content over the air, via multichannel video program distributors, and through digital platforms.
  • Diversified Healthcare Trust: Diversified Healthcare Trust is a real estate investment trust (REIT). It focuses on healthcare real estate throughout the U.S., including life science and medical office properties and senior living units. The company announced Q2 2022 results on Aug. 3. Net losses widened as total revenues declined moderately YOY. Rental income declined significantly YOY.

Fastest Growing Small-Cap Stocks

These are the top small-cap stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax laws or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

Fastest Growing Small-Cap Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
Highpeak Energy Inc. (HPK) 24.89 2.7 966.7 317.3
PBF Energy Inc. (PBF) 37.61 4.6 2,370 104.1
Ranger Oil Corp. (ROCC) 40.66 0.8 1,560 153.2

Source: YCharts

  • Highpeak Energy Inc.: Highpeak Energy is an independent crude oil and natural gas company that acquires, develops, and explores reserves in the Midland Basin in Texas. The company reported Q2 2022 earnings results on Aug. 8. Net income soared more than 13-fold as total operating revenues more than quadrupled YOY. Revenue growth was driven by strong increases in both crude oil and natural gas/natural gas liquids sales.
  • PBF Energy Inc.: PBF Energy is a holding company that, through subsidiaries, refines petroleum and supplies related products. Its offerings including transportation fuels, lubricants, heating oil, feedstocks, and more. The company issued earnings for Q2 2022 on July 28. Net income grew nearly 18-fold as revenue more than doubled YOY. PBF said that financial results reflect the consolidation of PBF Logistics LP (PBFX). PBF Logistics is a master limited partnership of which PBF Energy indirectly owns both the general partner as well as roughly 48% of the limited partner interests.
  • Ranger Oil Corp.: Ranger Oil is an independent oil and gas company that engages in onshore development and production of natural gas, natural gas liquids, and crude oil. Its operations are in Texas.

Small-Cap Stocks With the Most Momentum

These are the small-cap stocks that had the highest total return over the past 12 months.

Small-Cap Stocks With the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
InvenTrust Properties Corp. (IVT) 27.41 1.8 1,950
Alpha Metallurgical Resources Inc. (AMR) 169.47 2.9 351.0
PBF Energy Inc. (PBF) 37.61 4.6 296.3
Russell 1000 N/A N/A -8.2
Russell 2000 N/A N/A -12.2

Source: YCharts

  • InvenTrust Properties Corp.: InvenTrust Properties is a REIT that focuses on shopping mall properties. It targets grocery-anchored, open-air centers in the Sun Belt region of the U.S. On Aug. 1, InvenTrust reported Q2 2022 earnings results. Net income surged nearly 28-fold. Financial results were heavily affected by the June 30 sale of two Colorado properties for $55.5 million.
  • Alpha Metallurgical Resources Inc.: Alpha Metallurgical Resources is a metallurgical coal mining company. It extracts, processes, and markets coal for sale to steel and coke producers, electric utilities, and industrial clients. It operates in Virginia and West Virginia.
  • PBF Energy Inc.: See company description above.

Things to Consider When Analyzing Small-Cap Stocks

Management Quality: A competent management team is essential for any company, let alone a smaller one trying to establish itself in the market. Potential investors should undertake some basic online research on the key people within the company, such as the CEO and chief financial officer (CFO). Do they have a track record of running successful businesses? Also, see if the leadership team owns shares in the company. Company insiders owning stock indicates a commitment to success and aligns their interests with those of the shareholders.  

Growing Sales: Small-cap companies typically have limited cash flow—therefore, they must generate healthy sales. As a rule of thumb, small-cap investors should look for stocks with an annual revenue growth rate of at least 20%, which indicates that a company has the potential for disruptive innovation within its industry and is well positioned to generate a future profit. Investors can find this information on Yahoo! Finance under the "Financials" tab, which shows a company's revenue for the past three years.

High Operating Margins: A company's operating margin represents how efficiently it can generate profit through its primary operations before paying interest and tax. When investing in small caps, it is a good idea to look for consistently increasing operating margins, as this indicates that a company is good at turning sales into profits.

Advantages of Small-Cap Stocks

Growth Potential: Small-cap stocks provide investors with significant upside by getting in early before a company potentially goes on to become an industry leader. Moreover, small-cap stocks with a market capitalization of under $1 billion can double in value much easier than companies like Amazon or Apple that have $1 trillion-plus market caps, as it takes far less money to move their share price. Additionally, a small-cap stock that goes on to realize rapid growth can gain the attention of Wall Street analysts and institutional investors, which can increase shareholder returns even further.

Less Competition from Larger Investors: Institutional investors, such as banks, hedge funds, and REITs, typically stick to investing in large-cap stocks, often overlooking many small-cap opportunities. This allows retail investors to buy the story of a future company of tomorrow without competing with traditional Wall Street money.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended to be a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

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  1. YCharts. “Financial Data.”

  2. Jackson Financial Inc. "Jackson Announces Second Quarter 2022 Results," Pages 1, 11.

  3. Diversified Healthcare Trust. "Diversified Healthcare Trust Announces Second Quarter 2022 Results."

  4. Highpeak Energy Inc. "HighPeak Energy, Inc. Announces Second Quarter 2022 Results and Operational Updates."

  5. PBF Energy Inc. "PBF Energy Announces Second Quarter 2022 Results."

  6. InvenTrust Properties Corp. "InvenTrust Properties Corp. Reports 2022 Second Quarter Results."

  7. Samco. "What Are Small Cap Stocks and How to Evaluate the Best Small Cap Stocks?"

  8. SmartAsset. "Small Cap Stocks: Definition and Pros and Cons."

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