In December 2024, the Federal Reserve reduced interest rates by 25 basis points during the Federal Open Market Committee (FOMC) meeting, bringing the target range to 4.25%–4.5%. This move underscores the Fed’s dedication to its dual mandate of promoting maximum employment and maintaining price stability.

Small-cap stocks can be particularly attractive during periods of interest rate cuts due to their growth-oriented nature and sensitivity to economic changes. Lower rates reduce borrowing costs, enabling these smaller companies to invest in expansion and innovation more affordable.

Against this backdrop, let’s compare two small-cap stocks, Expensify, Inc. (EXFY) and Jowell Global Ltd. (JWEL), to analyze which small-cap stock offers more upside.

The Case for Expensify, Inc. Stock

Valued at $320.27 million by market cap, Expensify, Inc. (EXFY) provides a cloud-based expense management software platform to individuals and corporations, small and mid-sized businesses, and enterprises in the United States and internationally. The company’s platform enables users to manage corporate cards, pay bills, generate invoices, collect payments, and book travel. 

EXFY’s stock has gained 60.7% over the past three months to close the last trading session at $3.60. Over the past month, the stock has surged 17.3%.

EXFY’s trailing-12-month gross profit margin of 54.24% is 6.9% higher than the industry average of 50.93%. The stock’s trailing-12-month asset turnover ratio of 0.71x is 14.9% higher than the industry average of 0.62x.

For the fiscal third quarter that ended September 30, 2024, EXFY’s revenue was reported at $35.41 million. Its non-GAAP net income stood at $5.43 million, compared to a net loss of $6.74 million in the previous-year quarter. Its adjusted EBITDA stood at $9.68 million.

Street expects EXFY’s revenue for the fourth quarter (ending December 2024) to increase 2.3% year-over-year to $36.03 million. Its EPS for the current quarter is expected to increase 86.4% year-over-year to $0.07. Moreover, the company surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.

EXFY’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

EXFY has an A grade for Growth and a B for Value and Sentiment. It is ranked #32 out of 126 stocks in the Software – Application industry.

Click here for the additional POWR Ratings for EXFY (Quality, Stability, and Momentum).

The Case for Jowell Global Ltd. stock

Valued at $6.10 million by market cap, Jowell Global Ltd. (JWEL) engages in the online retail of cosmetics, health and nutritional supplements, and household products in China.

JWEL’s stock has declined by 14.1% over the past month to close the last trading session at $2.81.

JWEL’s trailing-12-month gross profit margin of 2.04% is 94.5% lower than the industry average of 37.43%. Its trailing-12-month CAPEX/Sales of 0.01% is 99.8% lower than the industry average of 2.95%.

JWEL’s net revenue for the six months that ended June 30, 2024, was reported at $85.68 million. The company’s net loss and net loss per share came in at $3.78 million and $1.74, respectively.

JWEL’s bleak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, translating to a Sell in our proprietary rating system.

The stock has an F grade for Quality and a D for Growth. JWEL is ranked #53 out of 60 stocks in the Internet industry.

In addition to the POWR Ratings I’ve just highlighted, you can see JWEL’s ratings for Value, Stability, Momentum, and Sentiment here.

Expensify Inc. (EXFY) vs. Jowell Global Ltd. (JWEL): Which Small-Cap Stock Offers More Upside?

Small-cap companies tend to be more domestically focused, benefiting directly from economic expansions and consumer spending increases. Small-cap stocks provide diverse sector exposure, helping to mitigate regulatory and sector-specific risks while offering a broad array of investment opportunities.

Small-cap companies EXFY and JWEL stand to capitalize on the optimistic industry outlook. However, EXFY’s higher profitability and strong financials favor it as the better small-cap stock pick. 

Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Software – Application industry here and the Internet industry here.

What To Do Next?

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EXFY shares closed at $3.60 on Friday, up $0.04 (+1.12%). Year-to-date, EXFY has gained 45.75%, versus a 25.54% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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