The U.S. economy is on the recovery path, with COVID-19 related restrictions being relaxed and industrial activities reopening. Small-cap stocks have been making a solid comeback in this scenario thanks in-part to government stimulus checks, especially to small- and medium-sized businesses (SMBs), and their access to cheap capital amid the low interest rate environment.
Investors’ increasing interest in the small-cap stocks is evident in the SPDR S&P 600 Small Cap ETF’s (SLY) 14.1% returns over the past six months.
So, for investors who want to invest in stocks with immense growth potential and can tolerate a level of market volatility, we believe Oxford Industries, Inc. (OXM) and NextGen Healthcare, Inc. (NXGN) could be solid picks.
Oxford Industries, Inc. (OXM)
OXM is an international apparel design, sourcing and marketing company that features a portfolio of owned lifestyle brands that include Tommy Bahama and Lilly Pulitzer, as well as owned and licensed brands of tailored clothing and golf apparel. OXM has a $1.70 billion market capitalization. OXM is based in Atlanta, Ga.
The company’s revenue for its first fiscal quarter, ended May 1, 2021, increased 65.7% year-over-year to $265.76 million. The company’s adjusted consolidated net income came in at $31.70 million, compared to an $18.6 million net loss in the year-ago period. Also, its adjusted EPS came in at $1.89, compared to a $1.12 loss in the prior-year period.
OXM’s levered free cash flow increased at a 58.3% CAGR over the past three years. For the current year, analysts expect OXM’s EPS and revenue to increase 387.9% and 39.7%, respectively, from the prior-year quarter to $5.21 and $1.05 billion. OXM also surpassed consensus EPS estimates in three of the trailing four quarters. The stock has rallied 136.9% over the past year to close Friday’s trading session at $100.55.
It’s no surprise that OXM has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth and Quality, and a B grade for Momentum. Click here to see OXM’s ratings for Value, Stability, and Sentiment also.
OXM is ranked #13 of 65 stocks in the A-rated Fashion & Luxury industry.
NextGen Healthcare, Inc. (NXGN)
NXGN provides healthcare software solutions and services to ambulatory, population health management, electronic data interchange, interoperability, and consulting services. Irvine, Calif.-based NXGN has a $1.10 billion market capitalization.
For its fiscal fourth quarter ended March 31, 2021, the company’s revenues increased 5.7% year-over-year to $144.19 million. NXGN’s non-GAAP net income came in at $13.99 million, which represents a 3.6% rise from the prior-year quarter. Also, its non-GAAP EPS came in at $0.21, up 5% from the same period last year.
The company’s levered free cash flow has increased at a 36.9% CAGR over the past three years. Analysts expect NXGN’s EPS and revenue to increase 9.9% and 4.4%, respectively, year-over-year to $1 and $605.01 million next year. NXGN surpassed the Street’s EPS estimates in each of the trailing four quarters.
On June 30, 2021, NXGN announced that Bowen Center, Indiana’s largest community mental health center, is leveraging NextGen Behavioral Health Suite, the industry’s only platform that integrates comprehensive physical, behavioral, and oral health in one software solution. Bowen Center exchanges patient records with other healthcare providers in the area to ensure a more complete picture of a patient’s combined mental and physical health record to anyone treating the patient. The stock has gained 59% over the past year to close Friday’s trading session at $16.49.
NXGN’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Growth, and a B grade for Value, Stability, and Quality. Click here to see the additional ratings for NXGN (Momentum and Sentiment).
NXGN is ranked #1 of 80 stocks in the Medical – Services industry.
Click here to checkout our Healthcare Sector Report for 2021
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REVISED: 2023 Stock Market Outlook (includes top 7 picks)
OXM shares were trading at $101.53 per share on Monday afternoon, up $0.98 (+0.97%). Year-to-date, OXM has gained 56.17%, versus a 17.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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