With the Russell 2000 making an outstanding move off the lows last fall, more and more investors have been looking for small cap stocks that may be poised to outperform their large and mid-cap brethren. Typically the small cap stocks have a more domestic bias and customer base, and often fare well during not only strong dollars periods, but those with rising interest rates.
The analysts at RBC recently released a research report in which they updated the top stocks that have made the U.S. Equity Small Cap Focus List. We screened the list for the stocks with the biggest upside potential to the RBC target prices. Of the four we selected, two have price targets in excess of 100% from where the stock currently trades. The four we selected are Nimble Storage Inc. (NYSE: NMBL), Shutterstock Inc. (NYSE: SSTK), WebMD Health Corp. (NASDAQ: WBMD) and Vaalco Energy Inc. (NYSE: EGY).
Nimble Storage made its IPO debut back in December of 2013, and the stock has been crushed back to right around the original offering price after doubling early last year. The company has developed a hybrid storage architecture engineered from the ground up to seamlessly integrate flash and high-capacity drives. Nimble’s flash storage solutions enable the consolidation of all workloads and eliminate storage silos by providing enterprises with significant improvements in application performance and storage capacity.
The RBC price target for the stock is $45, and Thomson/First Call consensus price target is set lower at $35.63. The stock closed Monday at $21.37. Trading to the RBC target would be over a 100% gain.
The undisputed leader for online commercial digital imagery, Shutterstock is the “you name, we have it” one-stop shop for any commercial or personal image or video need. The company offers its products for users to enhance their visual communications, such as websites, digital and print marketing materials, corporate communications, books, publications and video content. The RBC team is impressed with the company’s ability to take advantage of what they see is a secular movement of imagery and photography online.
With the additions of added sales force, new products, expansion and acquisitions all designed to help growth, and partnerships with Facebook and Salesforce.com, the stock could be poised for big growth.
The RBC price objective is a big $86 and the consensus target is even higher at $87.80. Shares closed trading Monday at $69.68. Hitting the RBC target would be a solid 23% gain.
WebMD Health is the top pick in the small cap focus list at RBC. It is the leading provider of health information services, serving consumers, physicians, health care professionals, employers and health plans through its public and private online portals, mobile platforms and health-focused publications.
With a large 13.1% of the stock sold short, some are still very bearish. That could prove dangerous for the shorts, as analysts’ estimates for the stock have moved higher recently. The company added $40 million to its stock buyback plan last year, and that number could boosted further in the future.
RBC has a $60 price target, and the consensus number is much lower at $47.67. WebMD closed Monday at $44.16 a share. Hitting that RBC target would be a 26.4% gain.
Four executives bought Vaalco Energy shares last week. The CEO, two directors and a vice president at the company picked up a combined 52,620 shares of the stock at between $3.10 and $3.29 apiece. This may be viewed as a very bullish sign for current shareholders and those looking to enter the stock now.
Vaalco is an independent energy company that acquires, explores for, develops and produces crude oil and natural gas in the United States. The company also owns producing properties and conducts exploration activities as an operator of consortium’s internationally in Gabon and Angola.
The RBC price target is a massive $7, and the consensus estimate is even higher at $7.33. The stock closed at $3.13, so trading to the target would be an incredible 124% gain.
Of course investors could see higher volatility with small cap stocks, so these are more suited for very aggressive growth accounts. Still, for those with the appetite, these could be big winners.