7 High-Risk, High-Reward Small-Cap Stocks to Buy Now


  • On a valuation basis, these small-cap stocks could be stocks to buy for long-term gains.
  • Monro (MNRO): A good-quality stock you can buy now or wait for lower prices in.
  • Jack in the Box (JACK): A well-known franchise with a low-priced valuation.
  • Ultra Clean Holdings (UCTT): Its low valuation and growing earnings make it a stock to buy.
  • Patrick Industries (PATK): It remains a stock to buy, even in this market environment.
  • Xencor (XNCR): It had weak earnings, but watch this stock for a buying point.
  • Emergent BioSolutions (EBS): There is risk in this stock, but it could be a good long-term holding.
  • Shutterstock (SSTK): A growth company, and one to buy over time.
small pig figurine on top of short stack of coins next to large pig figurine on top of large stack of coins. represents small-cap stocks to buy

Source: Shutterstock

When looking for small-cap stocks to buy, a good place to go is one of the many small-cap exchange-traded funds (ETFs) available for trading. One of these is the The SPDR Portfolio S&P 600 Small Cap ETF (NYSEARCA:SPSM). This ETF includes those small-cap stocks in the U.S. equity market that are representative of that sector of the U.S. economy and in the sector percentages that comprise the economy.

Like the stocks included in the S&P 500 Index, SPSM is passive in that it is not designed to outperform the market but to represent the U.S. economy. Meaning that portfolio managers are not weighting potential earnings, market performance or other factors in setting the portfolio. They are instead including stocks that are representative of economy.

The downside of this methodology is that there are no analysts to make the choices, using their skills and expertise. But the upside of this methodology is also that there are no analysts making choices … and perhaps misjudging individual stock performance. There are no potential biases creating missteps.

The reason to look at small-cap stocks to buy now is that the valuations look low. A reasonable price/earnings to growth (PEG) ratio is 1; the PEG ratio on the S&P 500 Index is 1.28; the PEG ratio on SPSM is .83, which is an attractive ratio when looking for stocks to buy.

MNRO Monro $44.68
JACK Jack in the Box $77.93
UCTT Ultra Clean Holdings $30.20
PATK Patrick Industries $65.21
XNCR Xencor $23.79
EBS Emergent BioSolutions $29.08
SSTK Shutterstock $62.42

Monro (MNRO)

Five tires in a dark gray background

Source: frank_peters / Shutterstock

The first of our small-cap stocks to buy is one of the major vehicle repair and tire service companies. Monro (NASDAQ:MNRO), will report Q4 2022 and year-end earnings soon. TipRanks.com has an estimated consensus estimate of 46 cents vs. 36 cents for the same quarter last year. MNRO stock is down a lot, having been as high as $69.49 in the last 52 weeks and now selling in the $44 area.

The company had $1.1 billion in sales last year and operates throughout the U.S. It is growing through acquisitions and opening stores, and has about 1,300 stores and 9,000 service bays throughout the U.S. The company offers many products and services, including car routine maintenance, brake products and services, mufflers, exhaust systems, and other full services and parts.

Zacks Investment Research estimates that MNRO will earn $2.13 this year; at $44, the stock is selling at over 20 times earnings. This is not cheap. But if the market continues getting pummeled, MNRO is a good-quality name, and could be a stock to buy at lower levels.

Jack in the Box (JACK)

stocks to sell

Source: LifetimeStock / Shutterstock.com

One name that is becoming a stock to buy, especially in this market weakness, is Jack in the Box (NASDAQ:JACK). JACK is a value play, with a known corporate name with many franchise outlets, and it is working with technology to improve its earnings picture. The company franchises most of its fast-food restaurants and directly operates a small percent them.

There are roughly 2,200 locations operating in 21 states in the U.S. and Guam.

SimplyWallSt.com puts its valuation at $122.18 vs. its price of around $78, and notes that its P/E ratio is 9.9, compared to the U.S. market’s ratio of 15.3, and the U.S. Hospitality industry average of 17.2.

JACK is well down from its 52-week high of $122.70, a casualty of the market environment that’s is punishing stocks that have decreasing earnings, as JACK does. JACK will present earnings on May 26, and TipRanks.com has consensus earnings per share expectations for the second quarter of 2022 at $1.36 compared to $1.48 that last year.

Ultra Clean Holdings (UCTT)

semiconductor stocks Close-up electronic circuit board. technology style concept. representing semiconductor stocks

Source: Shutterstock

One company’s stock that has gone down over 30% in the last 52 weeks is Ultra Clean Holdings (NASDAQ:UCTT). And the company has decent earnings and a reasonable P/E.

Ultra Clean makes and supplies cleaning services for the semiconductor industry. The company operates all over the world.

The consensus of TipRanks.com’s analysts rate the company a strong buy. Earnings will probably be announced in August, and for the Q2 period the estimate is $1.03 vs. last year’s 99 cents. UCTT has a trailing P/E ratio of 11.2, a reasonable multiple. SimplyWall.st estimates that earnings will grow 27.32% a year, and it points out that over the past five years, UCTT has grown 17.2% each year.

Based on its valuation and earnings prospects, UCTT is a stock to buy.

Patrick Industries (PATK)

A photo of a man in a mask and neon green vest in front of a home that's under construction.

Source: Tong_stocker/ShutterStock.com

Patrick Industries (NASDAQ:PATK) has a manufacturing division that makes and markets products for the RV, housing and industrial markets in the U.S. and certain companies overseas. The division also manufactures and distributes household and building items, such as furniture, shelving, bath fixtures and cabinet doors.

Patrick’s distribution division markets products to the RV and prefab housing industries.

Zacks Investment Research has a favorable fundamental analysis of the company: a price/earnings to growth ratio of 0.77, which is reasonable; and a forward P/E of 4.84, again, reasonably valued. Zacks ranks the company as a strong buy.

Patrick will probably report in July. For the second quarter 2022, the TipRanks.com consensus earnings per share is $3.54, and last year the company made $2.52 in the same quarter. These are very good numbers for a low-valuation company and make it look like a stock to buy.

Xencor (XNCR)

A close-up concept image of a tiny glass vial with a strand of DNA in it.

Source: Shutterstock

The healthcare sector looks promising and  Xencor (NASDAQ:XNCR), a clinical-stage biopharmaceutical company, has been operating in this space since 1997. It has many products in various stages of development and approval. The company works on discovering and developing products to treat patients with cancer, autoimmune diseases, Alzheimer’s disease, depression, and many other ailments and diseases.

Xencor also has a product in trial that will treat Covid-19.

So Xencor does have products in production, and there is potential in its products going through trials. XNCR stock is well down from its 52-week high, which was $43.61. The company will probably report its second quarter earnings in August. TipRanks.com has a consensus estimate of -44 cents per share vs 87 cents per share for the same quarter last year.

Unfortunately, MarketWatch.com’s estimate for this year’s earnings is -$1.82 and a loss next year of -$2.60.

But at a lower price, in this difficult market, XNCR could be a stock to buy for long term speculative investors.

Emergent Solutions (EBS)

stethoscope on a stock chart representing healthcare stocks to buy

Source: Shutterstock

TipRanks.com announced on April 29 that Keay Nakae, an analyst at Chardan Capital, estimated a price target on Emergent BioSolutions (NYSE:EBS) of $65 and reiterated a “buy” recommendation. TipRanks has a consensus “hold” on EBS, with an average target price of $42.40.

Emergent is a life sciences company that makes products that help guard against public health problems in the U.S. EBS produces vaccines, protective solutions, and treatments against anthrax, smallpox, opioid overdose, and other public health threats. EBS also makes an oral vaccine for typhoid fever, and cholera and many other products.

The company will probably report its second quarter earnings in August. TipRanks.com has a consensus estimate of 38 cents per shares vs. last year’s same quarter earnings per share of 33 cents.

For the year, Zacks is estimating $1.02 per share, and for next year, $2.86. This puts the 2023 price/earnings multiple at about 10, which is a quite reasonable P/E, if those earnings materialize. EBS is a stock to buy for long-term investors who understand the risk in the stock.

Shutterstock (SSTK)

Neon sign of the Shutterstock logo glowing against an exposed brick wall in the San Francisco office of Shutterstock, Inc. (NYSE: SSTK).

Source: Nova Patch / Shutterstock.com

Another of our small-cap stocks that has a good growth record, is expected to continue to grow and has come down very much from its 52-week high is Shutterstock (NYSE:SSTK).

The company will probably report its second-quarter 2022 earnings in August, and earnings will be down compared to that quarter a year ago. The consensus estimate at TipRanks.com is 95 cents; this compares with $1.02 last year.

Zacks Investment Research estimates that SSTK has a forward P/E ratio of 17.41, and its yearly earnings per share growth will be 7.48% over the next three to five years. This puts its price/earnings to growth ratio at 2.38. This PEG ratio is high, but not unreasonable for a growth company.

And SSTK is in a growth industry, which is the digital imagery industry. It operates an online market of digital images that can be accessed around the world. Shutterstock is a stock to buy. Investors can wait to buy – this market might give them a chance to get it at a little lower price. Or buy some and wait for the market to decline before buying more to dollar-cost average in.

On the date of publication, Max Isaacman did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Max Isaacman is an Investment Advisor Representative in San Francisco. He was a Merrill Lynch Representative and a Vice President of Lehman Brothers. His investment books were published by McGraw-Hill and Financial Times Press, including the first book on ETFs, How to be an Index Investor (McGraw-Hill, 2000). He wrote for the Emmy award-winning Website Minyanville.com. His email is exch13@aol.com.

Article printed from InvestorPlace Media, https://investorplace.com/2022/05/7-high-risk-high-reward-small-cap-stocks-to-buy-now/.

©2023 InvestorPlace Media, LLC