Small-cap stocks are solid investments in many different environments. They provide investors with diverse exposure to the stock market and, due to their growth potential, upside potential.
Sometime later this year, investors expect the Federal Reserve to begin cutting interest rates, which could boost the broad stock market. Particularly among small-cap stocks, which have been dealing with high borrowing costs,
Below, I discuss some small-cap stocks that have performed very well over the last year and are trading at a fair valuation. This makes them a strong buy for investors once interest rate cuts occur.
SkyWest (SKYW)
SkyWest (NASDAQ:SKYW): a regional airline company offering passenger and cargo transportation services among its fleet of approximately 500 aircraft. It also provides aircraft leasing services and chartering.
Over the past year, it has been the best-performing passenger airline company, and its share price has doubled. Other highly traded airline stocks, such as Southwest Airlines (NYSE:LUV) and American Airlines (NASDAQ:AAL), have experienced share price declines of over 20% and 36%, respectively.
On April 25, SKYW reported earnings results for the first quarter of 2024, stating that total revenue increased by 16% year-over-year. A net loss of $22 million was reported for Q1 2023, which shifted to a net income of $60 million for Q1 2024.
Airfares have been falling month after month recently, and the increased demand for travel, especially during the busy summer season, may boost SkyWest’s revenue.
It is currently trading at a fair valuation, with a forward P/E ratio of 12.15, while the sector average is 19.06.
SkyWest is still a strong buy despite its rapid share price appreciation over the last year. Following any news regarding rate cuts, it may be a company that investors become very drawn to.
NewLake Capital Partners (NLCP)
NewLake Capital Partners (OTCMKTS:NLCP) is an industrial REIT providing triple-net leases for legally operating businesses in its cannabis cultivation and dispensary facilities.
On May 9, NewLake Capital Partners announced its earnings for the first quarter 2024. It stated that total revenue increased by 10% and net income rose by 17% compared to the year before. The company is also seeking to improve its portfolio of facilities and it recently acquired a cultivation facility in Connecticut for $4 million.
Over the past year, its share price has increased by 47%, partly due to dividend increases, a recent real estate acquisition and strong earnings results.
It offers a dividend yield of approximately 9.15% on an annual basis. Its most recent quarterly distribution, forty-three cents per share, was paid out to investors on July 15.
NLCP beat analyst estimates and regained its first-quarter earnings. It also offers investors a decent valuation, with its forward P/E ratio being 14.25, while the median sector forward P/E ratio is 33.66.
NewLake Capital Partners is a stock likely to attract increased investor interest following rate cuts due to a likely increase in overall tenants.
Blue Bird (BLBD)
Blue Bird (NASDAQ:BLBD) is a company that manufactures and sells school buses. It offers a wide range of buses, including propane-powered, gasoline-powered, electric-powered and natural-gas-powered. It also offers bus maintenance services.
Blue Bird’s share price has risen by 135% this past year, primarily due to strong earnings and increased electric school bus sales.
On May 8, BLBD reported second-quarter earnings for fiscal year 2024, in which total revenue increased by 15% and net income more than tripled. It raised its full-year revenue guidance for the full year 2024, with expected revenue to be between $1.275 billion and $1.375 billion.
Blue Bird also reported a backlog of electric school bus orders in its second-quarter earnings report, along with total bookings for electric school buses surging by over 50%. This resulted in its share price increasing by 30% since this news.
Blue Bird is currently trading at a decent valuation. Its forward P/E ratio is 18.33, while the sector average is 19.06.
BLBD offers investors strong upside potential, especially after interest rate cuts, due to the higher likelihood of increased bus sales, primarily electric buses.
As of this writing, Noah Bolton did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
