FLWS: 3 Small-Cap Stocks That Could Soar for the Rest of 2020

There has been an increase in retail sales since September due to the upcoming holiday season. In addition, the low interest rate environment is continuously supporting the housing sector’s growth. Yet, jobless claims have been rising, and the hope for a major fiscal stimulus bill is fading away while the probability of a second wave of coronavirus is increasing every day. So, it’s really difficult to predict the market’s future direction.

However, there are definitely some tangible factors that can help you identify stocks that might keep soaring, irrespective of the direction of the market’s movement. In addition to a solid industry backdrop, a company’s financial strength is important for it to survive any challenges that the market might face. And what can be better than looking at the estimates for the about-to-be-reported earnings report for gauging a stock’s future performance.

With most of the big stocks either trading at very high valuations or have become value traps, small cap stocks are getting a lot of investor attention lately. As non-tech stocks have started getting some investor attention with the gradual reopening of the economy, betting on appropriate small cap stocks could be extremely rewarding.

The earnings season has been kind to a lot of industries so far. It could be worth betting on small-cap stocks that have been able to sustain or grow their businesses amid these challenging times. And the estimates for their upcoming financial results could help you identify such stocks.

1-800 FLOWERS.COM, Inc. (FLWS), Progress Software Corporation (PRGS), and Malibu Boats, Inc. (MBUU) are expected to report impressive financial results for their last completed quarter and grab significant investor attention in the upcoming months.

1-800 FLOWERS.COM, Inc. (FLWS)

Based in Carle Place, New York, FLWS is an e-commerce platform which provides gifts for various occasions and engages customers through differentiated products and unique services. The company’s products include, but are not limited to, fresh-cut flowers, dipped berries, chocolates, candles, and gift baskets. FLWS operates in three segments: Consumer Floral, Gourmet Food and Gift Baskets, and BloomNet Wire Service. FLWS is expected to blossom in the coming months as people will find ways to connect personally with their loved ones in the holiday season.

FLWS’ total net revenues increased a record 61% year-over-year to $418 million for the fiscal fourth quarter that ended June 2020, and 19.3% year-over-year to $1.5 billion for the fiscal year 2020. The strong performance was driven by net revenue growth in all three business segments. Revenue from Gourmet Foods and Gift Baskets was up 112.3%, Consumer Floral was up 46.5%, and BloomNet was up 10.7% year-over-year. Last month, for the upcoming holiday season, the company announced it was hiring more than 10,000 seasonal associates across its gourmet foods and gift brands.

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Analysts expect FLWS’ revenue to increase 47.1% for the fiscal first quarter that ended September 2020 and 9% next year. The company’s EPS is expected to increase 45.8% in the quarter, 21% next year, and at a rate of 20% per annum over the next five years. FLWS has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters.

The stock has gained 159.6% since hitting its 52-week low in March. The company introduced the “Season of Sharing” holiday gift collection, which includes 24 specially curated gifts from across the company’s family of brands on October 13^th, to benefit No Kid Hungry, a nationwide holiday campaign.

How does FLWS stack up for the POWR Ratings?

A for Trade Grade

B for Buy & Hold Grade

B for Peer Grade

B for Industry Rank

B for Overall POWR Rating

The stock is also ranked #26 out of 58 stocks in the Internet industry.

Progress Software Corporation (PRGS)

With the world going digital and businesses facing immense pressure to go digital to survive in this “new normal,” PRGS is in a beneficial position. It is a global software company that simplifies the deployment and management of business applications. The company’s products provide solutions for rapid application development, broad data integration and efficient data analysis. PRGS completed its acquisition of Ipswitch, Inc., last year, and on October 6^th, this year, it made the acquisition of Chef software for $220 million.

PRGS’ revenue increased 3% year-over-year to $109.7 million and EPS increased 77% to $0.53 for the fiscal third quarter. Analysts expect PRGS’ revenue to increase 3.7% for the quarter ending November 2020 and 13.2% next year. The company’s EPS is expected to increase 9.7% in the current year, 8.8% next year, and at a rate of 10% per annum over the next five years. PRGS has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters.

PRGS’ premier developer conference DevReach will be live streamed on the video streaming service Twitch from today until October 23^rd. It provides developers an opportunity to virtually interact and connect with each other. Also, the premier software and service provider of CRM, Constellation Financial Software, upgraded to Progress OpenEdge 12.1, this month. The stock has gained 22.9% since hitting its 52-week low of $28.09 mid-March.

PRGS’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with a “B” for Trade Grade and Industry Rank. Among the 96 stocks in the Software – Application industry, it’s ranked #41.

Malibu Boats, Inc. (MBUU)

Founded in 1982, MBUU is the leading designer, manufacturer, and marketer of recreational power boats including performance sport, sterndrive and outboard boats. The company started a new wave with its products since its inception. It has three brands of high-performance boats: Malibu, Axis Wake Research (Axis), and Cobalt. The Wakesetter 23 LSV received the WakeWorld 2020 Riders Choice Award and has been the best-selling towboat in the world for a dozen years now.

The company’s net sales per unit increased 8.6% year-over -year to $106,232 per unit for the quarter that ended June 2020, even though its net sales decreased 39.1% year-over-year to $118.7 million. The company has re-opened all brand production at pre-shutdown levels after it had to temporarily suspend production prior to the start of the quarter. Analysts expect MBUU’s revenue to increase 18.4% for the quarter that ended September 2020 and 9.2% next year. The company’s EPS is expected to increase 34% this year, 13.6% next year, and at a rate of 15% per annum over the next five years.

The company announced the release of the new luxury wake boat M220 last month. With the “social distancing” rules still in place, these sport boats provide a safer mode, and a “feel-good” factor is also associated with it. MBUU has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. The stock has gained almost 200% since hitting its 52-week low in April.

It’s no surprise that MBUU is rated “Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, and a “B” for Buy & Hold Grade and Industry Rank. In the 34- Athletics & Recreation industry, it is ranked #21.

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FLWS shares were trading at $28.60 per share on Monday afternoon, down $0.40 (-1.38%). Year-to-date, FLWS has gained 97.24%, versus a 7.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...