Over time, small-cap stocks usually experience more volatility and dramatic price fluctuations than larger companies. However, they are more likely to experience growth than large-cap companies.
Therefore, investors could consider buying fundamentally sound small-cap stocks, Docebo Inc. (DCBO), SIGA Technologies, Inc. (SIGA), and J.Jill, Inc. (JILL), with solid growth potential.
Despite being highly prone to market fluctuations, small-cap stocks tend to perform well during periods of economic growth. A reflection of this is evident in Friday's strong jobs report of the United States.
Moreover, the global economy has been quite resilient despite rate hikes. The International Monetary Fund (IMF) predicts a 3.2% economic growth in 2024 and 2025. For advanced economies, growth is expected to rise from 1.6% in 2023 to 1.7% this year.
Considering these encouraging trends, let’s take a look at the fundamentals of the three best small-cap stocks.
Docebo Inc. (DCBO)
Valued at $1.16 billion by market cap, DCBO operates as a learning management software company that provides Artificial Intelligence (AI)-powered learning platform in North America and internationally. It offers a Learning Management System (LMS) to train internal and external workforces, partners, and customers. The company is headquartered in Toronto, Canada.
DCBO’s trailing-12-month gross profit margin of 80.88% is 62.1% higher than the industry average of 49.91%. The stock’s trailing-12-month net income margin of 3.55% is 32.4% higher than the industry average of 2.68%. Also, the company’s trailing-12-month levered FCF margin of 15.03% is 48.2% higher than the industry average of 10.14%.
DCBO’s total revenue for the fiscal first quarter ended March 31, 2024, increased 24% year-over-year to $51.40 million. Its gross profit rose 24.2% from the previous year’s quarter to $41.48 million. Also, its adjusted net income came in at $7.27 million and $0.23 per share, representing an increase of 125.4% and 155.6% year-over-year, respectively.
Additionally, the company’s adjusted EBITDA grew 237.9% year-over-year to $7.47 billion.
DCBO’s revenue grew at a CAGR of 39% over the past three years. In addition, its total assets grew at 64.1% CAGR over the past five years.
Street expects DCBO’s EPS and revenues to rise 71.4% and 20% year-over-year to $0.24 and $52.32 million in the second quarter ending June 2024, respectively. The company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
Over the past year, the stock has gained 6.2% to close the last trading session at $38.10.
DCBO’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
DCBO has an A grade for Growth, Sentiment, and Quality. The stock is ranked #10 out of 135 stocks within the Software - Application industry.
To see the other ratings of DCBO for Value, Momentum, and Stability, click here.
SIGA Technologies, Inc. (SIGA)
Valued at $546.22 million by market cap, SIGA is a commercial-stage pharmaceutical company that focuses on health security-related markets in the United States. The company’s lead product is TPOXX, an oral formulation antiviral drug for the treatment of human smallpox disease caused by the variola virus.
On April 1, 2024, SIGA announced an amendment to its international promotion agreement with Meridian Medical Technologies, Inc. Under this amendment, SIGA will drive international promotion activities for oral TPOXX® while maintaining its contractual relationship with Meridian to maintain continuity for crucial customer relationships.
The company believes the amendment in the Meridian promotion agreement will be instrumental in driving long-term growth opportunities for oral TPOXX.
On March 12, SIGA’s Board of Directors declared a special cash dividend of $0.60 per share on its common stock, representing an increase of $0.15 per share, or 33%, over the June 2023 special dividend. This reflects the company’s robust capital structure and its ability to provide stable growth in the long run.
The dividend was paid on April 11, 2024, to shareholders of record at the close of business on March 26, 2024.
SIGA’s gross profit margin of 78.13% is 37.8% higher than the industry average of 56.71%. The stock’s trailing-12-month EBIT margin of 61.78% is significantly higher than the industry average of 1.51%. Also, the company’s trailing-12-month levered FCF margin of 59.31% is significantly higher than the industry average of 1.14%.
In the first quarter that ended March 31, 2024, SIGA’s total revenues increased 3.9% year-over-year to $25.43 million, and its operating income came in at $11.28 million, compared to an operating loss of $2.11 million in the previous year's quarter.
The company’s net income came in at $10.28 million, compared to a loss of $918.26 thousand in the previous-year quarter. Also, its income per share came in at $0.14, compared to a loss per share of $0.01 in the previous-year quarter.
SIGA’s revenue grew at a CAGR of 7.3% over the past two years, while its total assets grew at a 20.6% CAGR over the same time frame.
Analysts expect SIGA’s revenue and EPS for the fiscal year (ending December 2024) to increase 26.9% and 24.2% year-over-year to $177.56 million and $1.18, respectively.
Shares of SIGA have surged 74.9% over the past nine months and 30.4% over the past six months to close the last trading session at $7.68.
SIGA’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
SIGA has an A grade for Quality, Growth, and Value. It is ranked #9 in the 357-stock Biotech industry.
In addition to the POWR Ratings highlighted above, you can check SIGA’s ratings for Stability, Momentum, and Sentiment here.
J.Jill, Inc. (JILL)
JILL is an omnichannel retailer of women’s apparel under the J.Jill brand. The company offers casual wear, athletic wear, loungewear, footwear, and accessories, including scarves and jewelry. The company markets its products through retail stores, websites, and catalogs.
On May 14, 2024, JILL announced that it had completed a series of debt principal payments and approved a new quarterly dividend program. The total debt repaid was $60.4 million, which reduced the original $175 million term loan issued in April 2023 to $108 million.
In addition, JILL declared an initial quarterly cash dividend of $0.07, payable on June 12, 2024. The company’s annual dividend of $0.28 translates to a yield of 0.74% at the current price level.
JILL’s trailing-12-month gross profit margin of 70.91% is 93% higher than the industry average of 36.74%. Its trailing-12-month EBIT margin of 14.74% is 92.2% higher than the 7.67% industry average. Also, the stock’s trailing-12-month EBITDA margin of 18.48% is 66.2% higher than the 11.1% industry average.
JILL’s net sales increased 7.5% year-over-year to $161.51 million for the first quarter that ended May 4, 2024. Its gross profit grew 8.6% year-over-year to $117.74 million. The company’s adjusted income from operations increased 12.6% from the year-ago value to $29.60 million. Also, its adjusted EBITDA was $35.65 million, a 11.7% growth from the prior year’s quarter.
In addition, the company’s adjusted net income and adjusted net income per share came in at $17.58 million and $1.22, up 20.9% and 20.8% year-over-year, respectively.
JILL’s revenues have increased at a CAGR of 9.8% over the past three years, while its EBITDA has increased at a 5.4% CAGR over the past five years.
The consensus revenue of $154.30 billion for the third quarter (ending October 2024) represents a 2.8% increase year-over-year. Its EPS is expected to grow 12.4% year-over-year to $0.88 for the same period. Also, the company has topped the consensus EPS and revenue estimates in all four trailing quarters, which is remarkable.
Over the past year, JILL’s stock has gained 65.3% to close the last trading session at $37.95.
JILL’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
JILL has an A grade for Growth, Sentiment, and Quality. Within the A-rated Fashion & Luxury industry, it is ranked first out of 60 stocks.
To see JILL’s additional ratings for Growth, Sentiment, and Quality, click here.
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DCBO shares were trading at $37.85 per share on Monday afternoon, down $0.16 (-0.42%). Year-to-date, DCBO has declined -21.77%, versus a 12.94% 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.
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