3 High-Growth Small Cap Stocks For Your Portfolio

If you’ve been reading our Zen Strategies newsletters, you might already know that small-cap stocks, historically, outperform large cap stocks.

However, that hasn’t been the case for the past five years.

At some point, we’re going to see a long-term reversal to the mean — and there are weeks, like last week, where significant rotations happened.

To be precise, small-cap stocks led last week’s gains by a significant margin — and with the bigger picture in mind, there’s reason to believe that this trend will not only continue, but strengthen as time goes on.

But as you can see, the gains weren’t evenly distributed — with micro-cap and nano-cap stocks being the worst-performing categories last week.

So — it isn’t a matter of picking the right valuation and calling it a day. You need a way to separate the wheat from the chaff in order to pick not just the winners, but the outperformers. Thankfully, that doesn’t have to be a hassle — you can start by turning to our…

Small Caps Stock Strategy

Our in-house rating system leverages 115 unique factors, split across 7 categories, when evaluating stocks. Roughly 4,600 stocks are evaluated every single day — and the insights come together to form a single, user-friendly metric — a stock’s Zen Rating.

Only the top 5% of stocks are given a Zen Rating of A, equivalent to a Strong Buy rating. However, that still comes out to approximately 230 stocks for you to consider on any given day. Thankfully, you can easily reduce the scope of the search even more — by turning to one of our Zen Strategies.

Each strategy is a carefully-constructed portfolio consisting of just 7 stocks. There are 11 portfolios in total — and today, we’ll be taking a look at one of our best-performing strategies. It has an all-time annual return of 38.46% — and it’s managed to secure a 5.57% return since the start of the year. We are, of course, talking about our Small Caps stock strategy.

Now, it’s time for you to get acquainted with 3 interesting tickers from this portfolio…

MiMedx (MDXG)

An $800 million market cap business on the cutting edge of placenta-based medical products, MiMedx is our first pick for today. MDXG shares have a Zen Rating of A, and rank in the top 1% of the equities that we track — in fact, MDXG currently ranks 11th overall out of nearly 4,600.

MiMedx is trading at a P/E ratio of 19.36x, and a PEG ratio of 0.58x. That’s a very appealing valuation, particularly relative to growth prospects — putting it in the top 6% of stocks for Value. In terms of Growth, earnings are forecast to grow at 33.63% per year — putting MDXG in the 93rd percentile in this category.

Analyst coverage is quite positive too — Mizuho’s Anthony Petrone (a top 9% rated analyst) recently set a $10 price target, which implies an 84.50% upside for the stock. With regard to Sentiment, it’s in the top 4%. However, Financials are the star of the show here — as MDXG ranks in the top 1% for this Component Grade rating.

The only downside is Momentum. MDXG is in the bottom 20% in this category — and prices have dropped by 25.24% in the past 3 months. On the other hand, that’s quite the dip — the stock has solid fundamentals and is trading near its 52-week low, so a bounce may well occur soon — although the real upside will likely require an extended holding period.

Varex Imaging (VREX)

Varex Imaging designs, manufactures, and sells X-ray imaging components. VREX is currently in the top 1% of the stocks that we track, and is ranked 7th overall, while also being the top-rated stock in its industry.

The average 12-month price target for VREX, currently at $16.67, implies a healthy 20.86% upside. That puts it firmly in the top 1% for Sentiment — and the stock also ranks in the top 1% for Growth. On top of that, Varex Imaging is also in the 83rd percentile in terms of Value. Lastly, relatively low Beta, predictable earnings, and stable revenue inflows put VREX in the top 11% with regard to Safety.

At current prices, VREX is an enticing bet — particularly as we’re a month away from the next earnings report. The last 5 reports have delivered earnings beats — but the downside is that a miss would be a huge setback, as the stock is trading at a 3-month high that is simultaneously much closer to its 52-week high than its 52-week low.

Ironwood Pharmaceuticals (IRWD)

Lastly, we have Ironwood Pharmaceuticals — a $732 million market cap business which focuses on gastrointestinal and rare disease therapies. IRWD ranks in the top 1% of the stocks that we track, and is currently ranked 5th overall. Like our previous entry, it’s also the top-rated stock in its industry.

The most impressive thing about the business is its rock-solid balance sheet — IRWD ranks in the 99th percentile for Financials, with steadily improving margins and plenty of short-term assets. It also ranks in the 99th percentile with regard to Value, thanks to a P/E of 23.68x and a PEG ratio of 0.34x.

So, the stock is undervalued quite a bit relative to growth prospects — and with earnings forecast to grow at 69.68% per year, those prospects put Ironwood Pharmaceuticals in the top 14% in terms of the Growth Component Grade rating. Lastly, per our Artificial Intelligence rating, which uses a neural network trained to detect outperformers, IRWD is in the top 5% of stocks.

What about the cons? Well, like any other pharma business, Ironwood Pharmaceuticals lives and dies by its pipeline — and right now, it’s highly concentrated. The stock also ranks in the bottom 21% for Safety — so volatility is to be expected.

Interested In More Great Stock Picks?

The 3 stocks highlighted above are just a fraction of what you get from our proven Small Caps stock strategy. 

That’s because each day our system recalibrates — and Zen Strategies members get access to the top 7 income stocks based on 115 different parameters that point to outperformance. 

See all Top 7 Small Caps Stocks here > 

However, maybe you’re not a fan of small market cap equities. Perhaps you would like to see all 11 of our market beating strategies including Growth, Value, Momentum or perhaps even Income stocks. 

Each featuring the top 7 stocks.

Each featuring tremendous performance.

We spell it all out in this timely presentation below that lives up to its name:

77 Best Stocks Now! > 

What to Do Next?

• 77 Best Stocks NOW! >
• See All “A” Rated Stocks with +32.52% Average Annual Return >
• 2 New Stocks to Buy from Steve Reitmeister >

Want to get in touch? Email us at news@wallstreetzen.com.