4 Small-Cap Stocks That Are Ready to Explode in 2022

Small-cap stocks have had a great run this year and the trend is likely to continue in 2022. Last year, the pandemic rattled several industries, but the vaccination drive that started earlier in 2021 saw markets bouncing back.

The pandemic has, in fact, been a boon to small-cap stocks as startups and small companies have put up a great show through innovation. These have generated higher revenues on the back of continued economic recovery. Given that the U.S. economy is still showing resilience to the pandemic, small caps like One Stop Systems OSS, Titan International, Inc. TWI, Lazydays Holdings, Inc. LAZY and Beazer Homes USA BZH are likely to continue their rally in 2022.

Maintaining Low Profile

Small-cap stocks are typically those that command a market valuation less than a billion dollars. Thus, they are not as well-known as their larger counterparts. Moreover, these are generally newer companies still creating their business model and trying to get a foothold in the bigger space through product innovation and research. Hence, they end up making less or no money at this stage.

Small-cap stocks differ in their growth strategy and carry more risk. These are volatile in rough markets, unlike large-cap stocks. Understandably, they are a shade riskier as they can move a lot on a given day and again go stagnant.

However, small-cap stocks have been winners during the pandemic as they have made the most during this period of uncertainty. They have offered huge growth potential and high returns for the long run.

Moreover, large-cap companies struggled during the pandemic owing to their global presence and supply chain crisis. Small-cap companies, on the other hand, went on to become major sources of employment during the pandemic, as they have been in a better position to tap local talent.

Russell 2000 Going Strong

The Russell 2000 Index has somewhat trailed the three major U.S. benchmarks — the S&P 500, Nasdaq and Dow — on a year-to-date basis. However, the Russell 2000 Value Index has been outperforming the three indexes and inching toward Nasdaq 100 to surpass it.

The Russell 2000, which measures the performance of the 2,000 smallest companies in the Russell 3000 Index, has soared 55% as of Dec 29, 2021 since the lows it hit in March 2020, following the coronavirus outbreak.

In 2020, the Russell 2000 Index of small-cap stocks gained 70.9% compared with 44.5% gains for the large-cap S&P 500 Index. This year, the Russell 2000 Index has gained 13.7% year to date. This shows the potential in small-cap companies.

Our Picks

It is always difficult choosing small-cap stocks as they are not that well-known and do not have too many analysts covering them. So, the information available on them is limited. We have made things easier by handpicking three small-cap stocks for you that are ready to explode in 2022.

Titan International, Inc., despite being a small cap, is a well-known name and has been around for years. TWI is a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products. Titan International globally produces a broad range of products to meet the specifications of original equipment manufacturers and aftermarket customers in the agricultural, earthmoving/construction, and consumer markets.

Titan International’sexpected earnings growth rate is more than 100% for the current year and 31.8% for next year. The Zacks Consensus Estimate for current-year and next-year earnings has improved 10.5% and 5.1%, respectively, over the past 60 days. Shares of TWI have gained over 100% year to date. Titan International has a VGM Score of A and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

One Stop Systems designs and manufactures ultra-dense, high-performance computing systems for learning, oil and gas exploration, financial trading, media and entertainment, defense and traditional HPC applications. OSS provides GPU appliances that are fully integrated computer clusters, GPU expansion units, flash storage and network appliances, and flash storage arrays. One Stop Systems sells its products to multinational companies, governmental agencies, and technology providers through its website, web store, direct sales team, and OEM focused sales, as well as through a network of resellers and distributors.

One Stop’sexpected earnings growth rate is more than 100% for the current year and 18.1% for next year. The Zacks Consensus Estimate for current-year and next-year earnings has improved 4.8% and 13%, respectively, over the past 60 days. Shares of OSS have gained 19.8% year to date. One Stop has a VGM Score of A and carries a Zacks Rank #1.

Beazer Homes USA, despite being a small-cap company, is a relatively known name and has been benefiting since the onset of the pandemic, thanks to the housing boom. BZH designs, builds and sells single family homes. Beazer Homes’ objective is to provide customers with homes that incorporate quality and value. 

Beazer Homes’ expected earnings growth rate is 23.7% for the current year and 6.4% for next year. The Zacks Consensus Estimate for current-year and next-year earnings have improved 44% and 33.6%, respectively, over the past 60 days. Shares of BZH have gained 55.9% year to date. Beazer Homes has a VGM Score of A and carries a Zacks Rank #1.

Lazydays Holdings, Inc. is an iconic brand in the RV industry. LAZY offers RV brands, Lazydays features new and pre-owned RVs, service bays and on-site campgrounds. Lazydays Holdings also has rental fleets in Florida, Arizona and Colorado. In addition, Lazydays RV Accessories & More stores offer accessories and hard-to-find parts.

Lazydays Holdings’ expected earnings growth rate is more than 100% for the current year and 2.5% for next year. The Zacks Consensus Estimate for current-year and next-year earnings have improved 10.9% and 17.4%, respectively, over the past 60 days. Shares of LAZY have gained 28.6% year to date. Lazydays Holdings has a VGM Score of A and a Zacks Rank #1.

Zacks Top 10 Stocks for 2022

In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?

From inception in 2012 through November, the Zacks Top 10 Stocks gained an impressive +962.5% versus the S&P 500’s +329.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.