3 Small-Cap Stocks to Watch in the Coming Quarters

Market Trends - Investors are currently focused on the technology sector, particularly those involved in artificial intelligence, but there is a growing sentiment that better opportunities are emerging in other sectors, indicating a potential market rotation [1] - The Federal Reserve is expected to cut interest rates by September 2024, with a probability exceeding 90%, influenced by rising unemployment trends [2] Employment and Healthcare Sector - The healthcare sector added 48,600 jobs in the past month, contributing to a total of 206,000 jobs added across the economy, which represents 23.5% of total employment [3] - Cross Country Healthcare is highlighted as a stock to watch due to its alignment with the positive employment trends in the healthcare sector [3][11] Stock Analysis and Valuation - Barrington Research values Cross Country Healthcare stock at $21 per share, suggesting a 26.5% upside from its current price, which is only 62% of its 52-week high [4] - Cross Country Healthcare is projected to have a 39.73% earnings growth over the next 12 months, supporting a higher valuation [3][13] Small-Cap Stocks and Interest Rates - Small-cap stocks are expected to benefit significantly from lower interest rates, as reduced interest expenses will enhance earnings per share (EPS) [5] - Denny's balance sheet shows over 90% debt, indicating that lower interest rates will positively impact its future earnings potential, with analysts forecasting up to 11.5% EPS growth in the next year [7] Analyst Ratings and Institutional Investment - Denny's has seen an influx of institutional capital, raising its ownership rate to 85.1%, reflecting strong confidence from Wall Street [15] - ZipRecruiter has a current "Hold" rating among analysts, but its price target is set at $12.42, indicating a potential upside of 36.8% [16][25] Future Outlook - The consensus price target for ZipRecruiter is $12.4 per share, suggesting a net upside of 40.1% as employment prospects improve with potential Fed rate cuts [25] - Analysts believe that the same trends benefiting Cross Country Healthcare will also support ZipRecruiter, as both companies are positioned to gain from a recovery in employment [23][26]