Despite recent momentum, the S&P 500 is barely spilling black ink in 2015. And while small-cap stocks are typically a go-to source for outsized gains, “risk-on” hasn’t exactly been the order of the day, with the Russell 2000 faring worse than the broader market at slight losses for the year.
That doesn’t mean all small-cap stocks — which, as a general rule, means stocks with a market capitalization of less than $2 billion — should be shrugged off, though.
In fact, many smaller stocks have incredibly outsized growth on tap — something that’s especially appealing considering the general sideways movement of the market lately.
Let’s take a look at seven small-cap stocks to consider if you want more big-time potential in your portfolio.
Small-Cap Stocks to Buy: Everyday Health Inc (EVDY)
Market Cap: $309 million
Estimated Five-Year Average Annual Earnings Growth: 48%
Everyday Health (EVDY) is the smallest stock on this list and likely one that’s not currently on your radar.
The company — which is both a healthcare and an enterprise tech play — offers a platform that serves healthcare payers, providers and employers. It also has an expansive presence that includes brands such as MayClinic.org and South Beach Diet.
While earnings are expected to be flat for the current quarter, they’re expected to expand by 24% for the full year, and that’s on tap to be compounded by 35% growth the year after. And the growth doesn’t stop there. Earnings growth for the next half-decade is slated to average just shy of 50% annually.
No wonder the median price target for EVDY stock is 75% higher than current levels — although that’s partially thanks to the stock’s recent downwards momentum.
Small-Cap Stocks to Buy: Century Communities, Inc (CCS)
Market Cap: $426 million
Estimated Five-Year Average Annual Earnings Growth: 43%
So far this year, the housing market has been on fire. In September, for instance, U.S. housing starts jumped to a nearly eight-year high.
While that was thanks largely to the construction of apartments, single-family homebuilder Century Communities (CCS) is still set to benefit from the broader recovery.
This Colorado-based company builds single-family homes, townhomes and flats in major markets in Colorado, Texas, Nevada and Georgia. Sales are slated for big-time expansion: Analysts expect 120% revenue growth for the current quarter and the current full year. That’s expected to trickle to the bottom line nicely as well. Earnings are on tap to expand 150% and nearly 100% for those same periods, while that’s expected to smooth out to 43% long-term growth.
Despite those stellar rates, CCS stock has gained only 15% year-to-date. As a result, it’s trading for just 7 times forward earnings and has plenty of room for to run. In fact, the median price target for Century is $25.75, which translates to nearly 30% upside.
Small-Cap Stocks to Buy: Supernus Pharmaceuticals Inc (SUPN)
Market Cap: $796 million
Estimated Five-Year Average Annual Earnings Growth: 70%
Supernus Pharmaceuticals (SUPN) is a specialty pharmaceutical company. Put another way, it’s your typical high-risk, high-reward small-cap stock.
So far, SUPN has come out on the “high-reward” side of things, more than doubling so far this year, lifted recently on a settlement with Par Pharmaceutical Companies (PRX) over a generic version of Supernus’ Trokendi XR treatment.
Still, earnings for the company — which makes products for the treatment of central nervous system diseases — are expected to drop this year … then expand by over 500% next year … then smooth out to a 70% average longer-term.
So, SUPN is far from steady. But if you’re looking for growth, you’re getting it. In fact, despite the recent run, there remains nearly 40% upside to the median price target, and Northland Securities recently initiated positive coverage of Supernus, rating shares as “outperform.”
Small-Cap Stocks to Buy: NCI Building Systems Inc (NCS)
Market Cap: $816 million
Estimated Five-Year Average Annual Earnings Growth: 78%
It’s no secret that commodity prices have been plummeting — a fact that’s weighing on the next stock on this list.
NCI Building Systems (NCS) makes metal products for construction in nonresidential buildings — schools, manufacturing facilities and the like. The company is divided into three business segments: metal coil coating, metal components and engineered building systems — the latter two making up the lion’s share of NCI’s revenues.
That commodity weakness — which made itself felt via a recent downward slide in earnings and NCS stock of late — is why expectations are so high. Of course, those expectations also factor in a rebound in commodity prices, so buyer beware.
Right now, NCS stock sports a forward P/E of less than 19, yet is slated for long-term growth of 78% per year, including more than a doubling of earnings anticipated in the current fiscal year.
Small-Cap Stocks to Buy: Callaway Golf Co (ELY)
Market Cap: $841 million
Estimated Five-Year Average Annual Earnings Growth: 17.25%
It is, it is … and it’s yet another small-cap stock offering impressive growth prospects?
Sure, annualized long-term growth of 17% isn’t as head-turning as the rest of the stocks on this list, but it’s still not too shabby considering Callaway is already an established retail brand — plus it’s still better than the sector’s average of 13% and the S&P 500’s forecast for 6%.
ELY stock also is building up a nice head of steam, with shares up nearly 25% over the past month alone.
Small-Cap Stocks to Buy: Zeltiq Aesthetics Inc (ZLTQ)
Market Cap: $1.4 billion
Estimated Five-Year Average Annual Earnings Growth: 30%
Zeltiq Aesthetics (ZLTQ) is a medical technology company with a “controlled-cooling technology platform” that’s designed to attack fat — and that’s something that Zeltiq claims “more than 22.4 million people” are interested in.
That tech has Zeltiq beating the market handily so far this year. Since the start of 2015, shares have risen 21% vs. gains just north of 1% for the S&P 500.
Don’t be surprised at the optimism. Sales for 2015 are expected to expand a total of 44%, while earnings growth is slated for a mouth-watering 145% expansion.
This is another relatively high-risk pick, as seen by the stock’s volatile history, frothy valuation, short interest north of 17% and dependence on a single product.
But considering the growth on tap — which is expected to average to 30% annualized growth long-term — the risk just might be worth it.
Small-Cap Stocks to Buy: FCB Financial Holdings Inc (FCB)
Market Cap: $1.5 billion
Estimated Five-Year Average Annual Earnings Growth: 46%
It’s official: A rate hike is on the agenda for December. And when it comes to higher rates, the financial sector should definitely benefit. Which brings us to our final small-cap stock for big-time growth — and the largest small cap on this list.
FCB Financial Holdings (FCB) is a bank holding company with one wholly owned national bank subsidiary that has 50 branches in south and central Florida and approximately $7 billion in total assets. The bank describes itself as having an “entrepreneurial spirit” and prides itself on personalized service.
That’s paying off in 2015, at least, as evidenced by FCB’s 45% year-to-date rise.
Meanwhile, the bank is slated to grow sales by 30% and grow earnings by 120%. Longer term, earnings are on tap to expand by 46% annually.
Alyssa Oursler is based in San Francisco and writes about technology, investing, gender and entrepreneurship. Her work has appeared on Forbes, Business Insider, MSN Money and more. You can follow her on Twitter here or check out her personal site here. As of this writing, she did not hold a position in any of the aforementioned securities.