We recently explored the best small-cap stocks to buy according to analysts. To visit the full free list, go to 8 Best Small-Cap Stocks Ready to Explode According to Analysts
Though EZCORP, Inc. (NASDAQ:EZPW) ranks 7th in our list of the 8 Best Small-Cap Stocks Ready to Explode According to Analysts, we have analyzed the stock in detail.
Small-cap stocks are companies that have a market capitalization falling between $300 million and $2 billion. We’ve often seen these smaller enterprises outshined by their large-cap counterparts, also because stocks like Google, Apple, Amazon etc. are known for their power to move entire markets. But it doesn’t mean that these small-cap stocks cannot present some golden opportunities for investment.
Small-cap stocks started gaining momentum during the last quarter of 2023, driven primarily by the AI-led rally that pushed the entire stock market high, thus putting away any immediate worries of an upcoming recession. According to Julius Baer, a private banking company based in Zurich, small-cap stocks have proven to, in fact, even outperform their larger-cap counterparts over very long periods. The report mentions that a dollar invested in US large-caps in 1926 grew in value to $5,767 by the end of 2018. Meanwhile, a single dollar invested in small-caps instead would have been worth a whopping $38,842 – almost seven times more.
However, what really makes these stocks attractive to investors is their potential for high returns. We will much more often see companies doubling their market capitalization from $1 billion to $2 billion, than let’s say from $1 trillion to $2 trillion. Small-caps tend to be fast-growing companies that can take more chances and respond to events and trends more efficiently than larger companies. Moreover, a recent analysis by MorningStar has revealed that small-caps look cheaper now relative to the broad market than at any time in the last 20 years.
But, of course, higher returns come with higher risks. Small-caps are highly vulnerable to macroeconomic factors and are thus more prone to market fluctuations, simply because they don’t possess the same financial power as larger corporations, making it hard for them to survive unexpected emergencies. Additionally, these companies often have fewer outstanding shares, can’t borrow money as easily as bigger companies, and are more likely to have negative cash flows, leading to them paying lower or no dividends. They are also usually covered by fewer analysts and thus come with limited transparency and data for individual investors.
According to Marcio Silveira, a CFP, former equity analyst, and owner of Silvergreen Sustainable Investments:
“Since the 2010s, we’ve had some changes in how the economy works. All the top companies are tech companies now, and small-caps are underperforming because they can’t compete with these mega winner-take-all companies. You can find great opportunities in individual small-cap stocks, but you need to do a lot of fundamental analysis to find the hidden gems.”
EZCORP, Inc. (NASDAQ:EZPW)
Upside Potential as of May 21st: 69.83%
Market Cap: $549.97 million
Formed with 16 pawn stores in 1989, EZCORP, Inc. (NASDAQ:EZPW) has grown into a leading provider of pawn loans in the United States and Latin America. The Texas-based company reported a revenue of $285.6 million in its second quarter ended March 31st 2024, up 10.5% from the same quarter last year. Meanwhile, it also had a net profit of $21.5 million, up from a net loss of $6.8 million last year. During the second quarter, EZCORP, Inc. (NASDAQ:EZPW) opened nine de novo stores in Latin America and also acquired six stores in the U.S. The company now has a total of 1,246 stores, with over 7,800 team members.
Among the 20 hedge funds that held stocks of EZPW at the end of Q4 2023, Fort Baker Capital Management boasted the largest stake of almost 20.54 million shares, valued at around $20.49 million.
EZCORP, Inc. (NASDAQ:EZPW) has a recession-resistant business model, since pawn loans tend to grow during economic downturns. Moreover, the stock can also benefit from the company’s expanding geographical operations. EZPW is currently trading with a trailing 12-month P/E ratio of 8.17, putting it among the Top Undervalued Small-Cap Stocks to Buy.
EZCORP, Inc. (NASDAQ:EZPW) ranks 7th on our list. To see the full free list, visit 8 Best Small-Cap Stocks Ready to Explode According to Analysts.
If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
