Experts consider small-cap stocks relatively safer bets due amid lingering market volatility caused by high inflation, supply chain disruption, and the rapid spread of the COVID-19 omicron variant. According to Francis Gannon, Co-Chief Investment Officer at Royce Investment Partners, “I do think small-caps have an edge here over their large-cap brethren here just because of the fact that you’re going to see very strong earnings growth in a much broader market.” Furthermore, the continuing low-interest-rate environment bodes well for small-cap stocks.
Gerard O’Reilly, CEO and CIO of Dimensional Fund Advisors, recently stated, “Even after years when small/value has outperformed large/growth…the following 12 months tend to be pretty good for small and value.” Investors’ interest in small-cap stocks is evident in the Invesco S&P SmallCap 600 Equal Weight ETF’s (EWSC) 4.7% returns in the past month and 4.2% returns in the past three months.
Therefore, we think it could be wise to bet on fundamentally strong small-cap stocks Varex Imaging Corporation (VREX), Heidrick & Struggles International, Inc. (HSII), Natus Medical Incorporated (NTUS), and Huttig Building Products, Inc. (HBP). These stocks are rated ‘Strong Buy’ in our POWR Ratings system.
Varex Imaging Corporation (VREX)
Salt Lake City, Utah-based VREX designs and manufactures X-ray imaging components. The company operates in two segments: Medical and Industrial. VREX has a 70-plus-year history of successful innovation and employs approximately 2,100 people in North America, Europe, and Asia. It has a market capitalization of $1.26 billion.
On Nov. 16, 2021, Sunny Sanyal, CEO of VREX, said, “I am extremely proud of the immense effort our global employees made to prioritize meeting the very high demand environment while working to mitigate a dynamic supply chain. We look forward to carrying this momentum into fiscal year 2022.”
VREX’s total revenues increased 33.1% year-over-year to $226.30 million in its fiscal 2021 fourth quarter, ended October 1, 2021. Its non-GAAP gross profit came in at $77.60 million, up 64.1% year-over-year. Also, its non-GAAP gross margin came in at 34.3% compared to 27.8%, and its non-GAAP EPS was $0.45, compared to a $0.04 loss per share.
Analysts expect VREX’s revenue to increase 6% year-over-year to $867.47 million in its fiscal 2022. Its EPS is estimated to increase 13.3% to $1.62 for fiscal 2023. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 91.3% in price to close yesterday’s trading session at $31.91.
VREX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
VREX has an A grade for Growth and Value and a B grade for Quality. Within the Medical – Devices & Equipment industry, it is ranked #6 of 169 stocks. Click here to see the additional POWR Ratings for Momentum, Stability, and Sentiment for VREX.
Heidrick & Struggles International, Inc. (HSII)
HSII in Chicago provides executive search and consulting services to businesses and business leaders worldwide. The company enables its clients to build leadership teams by facilitating senior executives’ recruitment, management, and development. It has a market capitalization of $884.56 million.
On December 21, 2021, HSII agreed to acquire RosExpert in Russia and WE Partners in Ukraine and Kazakhstan. These moves are expected to boost the company’s finances.
For its fiscal 2021 third quarter, ended September 30, 2021, HSII’s total revenue increased 83.6% year-over-year to $265.31 million. The company’s net income came in at $24.50 million, compared to a $26.18 million loss in the year-ago period. Its EPS was $1.21, compared to a $1.35 loss per share in the previous year period.
HSII’s revenue is expected to be $978.39 million in its fiscal year 2021, representing a 57.4% year-over-year rise. The company’s EPS is expected to increase 112.4% year-over-year to $3.76 in its fiscal 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 53.7% in price to close yesterday’s session at $45.15.
It is no surprise that HSII has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Growth and Value and a B grade for Sentiment and Quality. HSII is ranked #1 of 20 stocks in the A-Rated Outsourcing – Staffing Services industry. Click here to see the additional POWR Ratings for HSII (Momentum and Stability).
Natus Medical Incorporated (NTUS)
NTUS in Pleasanton, Calif., provides medical device solutions focusing on diagnosing and treating patients with central nervous and sensory system disorders worldwide. It serves university medical centers, public and private hospitals, physician offices, clinics, and research laboratories. It has a market capitalization of $819.66 million.
On Nov. 4, 2021, Jonathan Kennedy, President and CEO of NTUS, said, “We saw the benefits of our investments in innovation this quarter with the release of the new Retcam Envision newborn eye imaging system in the United States, the first successfully performed clinical case using Natus’ newly launched XactTrode™ family of platinum subdural electrodes and another quarter of growing sales for our UltraPro EMG device, which was released in the fourth quarter of 2020.”
NTUS’ revenue increased 10.8% year-over-year to $113.88 million for its fiscal year 2021 third quarter, ended Sept. 30, 2021. The company’s net income came in at $5.57 million, compared to a $9.32 loss in the prior period. And its EPS was $0.16 compared to a $0.28 loss per share.
For its fiscal 2021, analysts expect NTUS’ revenue to be $471 million, representing a 13.3% year-over-year rise. The company’s EPS is expected to increase 194.9% year-over-year to $1.15 in fiscal 2021. Over the past year, the stock has gained 19.8% in price to close yesterday’s trading session at $24.
NTUS’ POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Growth and Value and a B grade for Quality. Click here to see NTUS’ ratings for Momentum, Stability, and Sentiment as well. Again, NTUS is ranked #3 of 169 stocks in the Medical – Devices & Equipment industry.
Huttig Building Products, Inc. (HBP)
Together with its subsidiaries, HBP distributes millwork, building materials, and wood products for new residential construction, home improvement, remodeling, and repair work in the United States. It has a market capitalization of $267.38 million. HBP is headquartered in St. Louis, Miss.
On Nov. 3, 2021, Jon Vrabely, the President and CEO of HBP, said, “Our strong performance in the quarter, and on a year-to-date basis, are a direct result of the fortitude and dedication of our associates and the actions we have taken over the past two years to meaningfully and sustainably improve our financial model.”
HBP’s net sales increased 15.3% year-over-year to $245.30 million for its fiscal third quarter, ended Sept.30, 2021. Its net income came in at $18.70 million, up 206.6% year-over-year, and its EPS increased 183.3% year-over-year to $0.68.
Over the past year, the stock has gained 165.9% in price to close yesterday’s trading session at $9.76.
HBP’s strong fundamentals are reflected in its POWR ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Growth and Value and a B grade for Momentum and Quality. It is ranked #1 of 55 stocks in the Industrial – Building Materials industry. Click here to see the additional POWR Ratings for HBP (Stability and Sentiment).
Want More Great Investing Ideas?
VREX shares were trading at $31.77 per share on Tuesday morning, down $0.14 (-0.44%). Year-to-date, VREX has gained 0.70%, versus a 0.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|VREX||Get Rating||Get Rating||Get Rating|
|HSII||Get Rating||Get Rating||Get Rating|
|NTUS||Get Rating||Get Rating||Get Rating|
|HBP||Get Rating||Get Rating||Get Rating|