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Philip van Doorn

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Dec. 20, 2017, 7:11 a.m. EST

18 small-cap stocks that analysts expect to rise at least 50% in 2018

They expect four of them to double in price

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By Philip van Doorn, MarketWatch


Bloomberg
Coal is loaded on a vessel at a Consol Energy-owned terminal. Analysts expect Consol’s share price to rise 63% over the next 12 months.

(This is the third in a three-part series on analysts’ favorite stocks for 2018. The series began with <CROSSREF GUID="{9D9B8F90-D6A5-11E7-8BB4-26F71ABE4CAE}" DOCTYPEID="" FILE-NAME="" ENCODING-DATE="">large-cap stocks</CROSSREF> and continued with <CROSSREF GUID="{232D6DEC-D929-11E7-ADAC-C4FFC99111B8}" DOCTYPEID="" FILE-NAME="" ENCODING-DATE="">mid-cap stocks</CROSSREF>.)

A year ago we listed analysts’ favorite small-cap stocks for 2017. The results are mixed. But for next year, Wall Street is even more enthusiastic about smaller companies than they were during the initial euphoria following President Trump’s election.

When we pulled the list of analysts’ favorite small-cap stocks for 2017, we started with the S&P 600 Small-Cap Index /zigman2/quotes/210599868/delayed SML -0.60%  and identified 24 companies with majority “buy” ratings among at least three analysts. They also had consensus price targets that showed the stocks were expected to rise at least 31% over the next 12 months, with gains of 50% or more expected for seven of them.

A new list based on the same criteria shows that analysts now expect gains of at least 50% for 18 stocks over the next 12 months.

Here’s how the S&P 600 Small-Cap Index has performed against the large-cap S&P 500 /zigman2/quotes/210599714/realtime SPX -1.12%  and the S&P 400 Mid-Cap Index /zigman2/quotes/219506813/composite MID +0.29%  over the past year:


FactSet

Perhaps it shouldn’t be a surprise that large-cap stocks have fared best over the past year, considering how dominant the highest-profile tech giants, including Apple Inc. /zigman2/quotes/202934861/composite AAPL -3.17% , Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -1.79%  and Facebook Inc. /zigman2/quotes/205064656/composite FB -0.90%  have been.

But both houses of Congress have passed major tax reform bills that would lower the federal income tax rate for corporations to 20% from 35%. This would, of course, benefit most U.S. companies, but small-cap companies may have the most to gain, as their revenues tend to be concentrated domestically. That and their simpler structures mean they are likely to have fewer tax loopholes to exploit under current law than many large-cap companies have.

Mixed results for last year’s list

Before showing you how last year’s small-cap list fared, here are updates on two of the names that are no longer around:

• Cynosure Inc. had a consensus price target of $61.63, implying 38% upside over its share price of $44.55 on Dec. 7, 2016. The company was acquired by Hologic Inc. /zigman2/quotes/201671131/composite HOLX +0.54%  for $66 a share in cash on March 22.

• First NBC Bank Holding Co. had a price target of $12.90, implying 60% upside over its Dec. 7, 2016, share price of $8.05. First NBC was the worst-performing stock on the list that year, but analysts expected it to recover, despite serious problems with its main subsidiary, First NBC Bank of New Orleans. The bank was shuttered by Louisiana regulators in April. The holding company’s stock was delisted in May.

Here’s how the remaining 22 stocks from last year’s list have performed over the past year:

Company Ticker Closing price - Dec. 7, 2016 Consensus price target - Dec. 7, 2016 Implied 12-month upside potential as of Dec. 7, 2016 Closing price - Dec. 4, 2017 Price change - Dec. 7, 2016, through Dec. 4, 2017
Spectrum Pharmaceuticals Inc. /zigman2/quotes/205199409/composite SPPI $4.14 $10.00 142% $18.63 350%
Acorda Therapeutics Inc. /zigman2/quotes/208738192/composite ACOR $20.50 $35.25 72% $20.80 1%
Nektar Therapeutics /zigman2/quotes/206715615/composite NKTR $12.33 $20.33 65% $50.73 311%
Flotek Industries Inc. /zigman2/quotes/200116711/composite FTK $11.10 $17.33 56% $4.65 -58%
R.R. Donnelley & Sons Co. /zigman2/quotes/204482948/composite RRD $16.68 $26.00 56% $8.92 -47%
Medicines Co. $33.37 $51.45 54% $28.34 -15%
Vasco Data Security International Inc. $14.05 $21.00 49% $12.75 -9%
Emergent BioSolutions Inc. /zigman2/quotes/204817890/composite EBS $26.52 $39.60 49% $43.86 65%
Omnicell Inc. /zigman2/quotes/206304672/composite OMCL   $32.40 $46.00 42% $52.15 61%
LSB Industries Inc. /zigman2/quotes/209221618/composite LXU $8.47 $11.50 36% $8.84 4%
Stamps.com Inc. /zigman2/quotes/202777086/composite STMP $110.20 $149.33 36% $169.75 54%
TiVo Corp. $21.00 $28.40 35% $16.50 -21%
Ligand Pharmaceuticals Inc. /zigman2/quotes/202030140/composite LGND $102.59 $138.17 35% $129.30 26%
Almost Family Inc. $39.85 $53.00 33% $58.70 47%
Tetra Technologies Inc. /zigman2/quotes/209715792/composite TTI $5.65 $7.51 33% $4.11 -27%
Comtech Telecommunications Corp. /zigman2/quotes/209850231/composite CMTL $12.75 $16.79 32% $20.69 62%
Contango Oil & Gas Co. /zigman2/quotes/208310902/composite MCF $9.34 $12.30 32% $3.06 -67%
Motorcar Parts of America Inc. /zigman2/quotes/203557527/composite MPAA $27.62 $36.25 31% $24.83 -10%
Cray Inc. $19.70 $25.80 31% $21.85 11%
Nautilus Inc. /zigman2/quotes/206873003/composite NLS $17.95 $23.50 31% $13.20 -26%
Lannett Co. /zigman2/quotes/205623272/composite LCI $23.25 $30.40 31% $28.55 23%
Natus Medical Inc. $38.05 $49.67 31% $38.75 2%
Source: FactSet

So of last year’s list of 24 small-cap stocks most favored by analysts, eight performed better than expected. That 33% success rate is better than what we saw for the large-cap list, but a bit worse than the results for last-year’s mid-cap list. And of course last year’s small-cap list featured a bank that failed. The small-cap list also featured two stocks that more than tripled — Spectrum Pharmaceuticals Inc. /zigman2/quotes/205199409/composite SPPI +6.99%  and Nektar Therapeutics /zigman2/quotes/206715615/composite NKTR -0.84%

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$ 1.22
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$ 6.38
+0.20 +3.24%
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$248.56 million
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$ 4.90
+0.32 +6.99%
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Market Cap
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Market Cap
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Rev. per Employee
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