Lingering concerns about the surge in COVID-19 cases, coupled with persistently high inflation, continue to taint investors’ optimism surrounding the economic recovery, resulting in heightened stock market volatility. This is evident from the CBOE Volatility Index’s (VIX) 76.5% increase over the past month.

While the looming interest rate hike may not bode well for small-cap stocks as higher rates would reduce their access to cheap capital, many market strategists believe small-cap stocks could be relatively safer bets amid the uncertainties surrounding the market. Though small-cap stocks tend to experience more volatility than mid-cap and large-cap stocks, they possess greater growth potential than larger companies. Investors’ interest in small-cap stocks is evident from the Invesco S&P SmallCap 600 Equal Weight ETF’s (EWSC) 10.1% returns over the past year.

That’s why today we’re highlighting 3 stocks from our Top 10 Small-Cap screen, which is just 1 of the 10 outperforming screens in our POWR Screens 10 service (more on that below).  Tenant Company (TNC), Forrester Research Inc. (FORR), and SunCoke Energy Inc. (SXC) could be ideal picks now. These stocks are well-positioned to deliver solid returns based on their solid growth attributes and fundamental strength.

Tenant Company (TNC)

TNC, along with its subsidiaries, design, manufacture, and sell floor cleaning equipment throughout the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company markets its products to contract cleaners and companies through direct sales and service groups and a network of approved distributors. It has a market capitalization of $1.43 billion.

TNC’s net sales increased 3.9% year-over-year to $272 million in the third quarter ended September 30, 2021. Its operating income grew 29.9% from the year-ago value to $23.9 million. The company’s net income surged 83.8% from the prior-year quarter to $21.5 million, while its EPS increased 81% year-over-year to $1.14 over this period.

The company’s EPS is expected to grow 47.8% year-over-year to $4.3 in fiscal 2021. Analysts expect TNC’s revenue to increase 9.5% year-over-year to $1.1 billion in fiscal 2021. The stock has gained 4.4% over the past year.

TNC’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

TNC is also rated an A grade for Sentiment and a B for Growth and Value. Within the B-rated Industrial – Machinery industry, it is ranked #1 of 79 stocks. To see additional POWR Ratings for Quality, Stability, and Momentum for TNC, click here.

Forrester Research Inc. (FORR)

With a market capitalization of $1.06 billion, FORR is a global independent research and advising company based in the United States. Research, Consulting, and Events are the three business segments of the organization. Additionally, it provides advising and project consulting services and hosts a variety of events.

In November, FORR announced the addition of new predictive functionality to its FeedbackNow product, allowing organizations to proactively anticipate customer experience (CX) issues before they arise. According to the company, FeedbackNow, which is powered by strong analytics, enables organizations to collect important real-time CX feedback at the point of experience, allowing them to act where and when it counts.

During the third quarter ended September 30, 2021, FORR’s total revenue increased 8.8% year-over-year to $118.14 million. Its operating income grew 3658% from the year-ago value to $6.54 million. The company reported a net income of $4.52 million, compared to a net loss of $3.76 million in the prior-year quarter. Its EPS came in at $0.23, compared to a loss per share of $0.20 in the third quarter of 2020.

The consensus EPS estimate of $2.07 for fiscal 2021 represents a 29.4% improvement year-over-year. Analysts expect FORR’s revenue to increase 10% year-over-year to $494.34 million in fiscal 2021. The stock has gained 26.4% over the past year and 19.5% over the past six months.

FORR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Growth, Sentiment, and Quality. In the Financial Services (Enterprise) industry, it is ranked #1 of 119 stocks.

In total, we rate FORR on eight different levels. Beyond what we’ve stated above, we have also given FORR grades for Stability, Momentum, and Value. Get all the FORR ratings here.

SunCoke Energy Inc. (SXC)

SXC is an independent coke producer in the Americas and Brazil. Domestic Coke; Brazil Coke; and Logistics are the company’s three operational segments. The company also offers handling and mixing services to steel, coke, electric utility, coal producing, and other manufacturing-based customers. In addition, it owns and operates five coke-making facilities in the United States and one in Brazil. The stock has a market capitalization of $562.46 million.

For the third quarter ended September 30, 2021, SXC’s sales and other operating revenue increased 21.3% year-over-year to $366.5 million. Its operating income grew 245% from the year-ago value to $41.4 million. The company reported a net income of $23 million, compared to a net loss of $2.7 million in the prior-year quarter. Its EPS came in at $0.27, compared to a loss per share of $0.03 in the third quarter of 2020. increased 43.5% year-over-year to $1.22. In addition, its adjusted EBITDA surged 57.8% from the prior-year quarter to $71.8 million.

Analysts expect SXC’s revenue to increase 17.2% year-over-year to $1.56 billion in fiscal 2021. In addition, the company’s EPS is expected to grow at the rate of 8% per annum over the next five years. Over the past year, the stock has gained 24.2%.

SXC’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. SXC has also rated an A grade for Growth and Momentum and a B for Value. Within the A-rated Coal industry, it is ranked #1 of 11 stocks. Click here to see additional POWR Ratings for Stability, Sentiment, and Quality for SXC.

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TNC shares were unchanged in after-hours trading Tuesday. Year-to-date, TNC has declined -5.06%, versus a -8.52% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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