Rate Cut to Significantly Benefit Small-Cap Stocks: 5 Top Picks

Core Viewpoint - The Federal Reserve's decision to cut the benchmark lending rate by 50 basis points is expected to benefit small businesses, leading to potential investment opportunities in this sector [1][4]. Small Business Sector - Small businesses have faced significant challenges since the COVID-19 pandemic, including demand issues and supply chain disruptions [3]. - Post-pandemic, inflation and high-interest rates have further strained small businesses, which typically operate on thin profit margins and lack geographical diversification [3]. - A decline in interest rates is crucial for the survival of small-cap stocks, as they rely heavily on affordable credit [4]. Investment Opportunities - Five small-cap companies are identified as having strong growth potential and positive earnings estimates for the remainder of 2024: EZCORP Inc., American Superconductor Corp., Byrna Technologies Inc., Lifeway Foods Inc., and Willdan Group Inc. [2][5]. - These companies have shown significant stock price increases year-to-date, with further upside potential [2]. Company Summaries EZCORP Inc. - EZCORP provides pawn services across the U.S. and Latin America, operating through multiple segments and offering a web-based application for customer transactions [6]. - Expected revenue and earnings growth rates for EZCORP are 7.6% and 8.9%, respectively, with a short-term stock price upside of 47.5% from an average target price of $16 [7]. American Superconductor Corp. - AMSC offers power resiliency solutions globally, focusing on grid and wind segments [8]. - The company anticipates a revenue growth rate of 41.6% and earnings growth of over 100%, with a stock price upside of 38.5% from an average target price of $30.33 [9]. Byrna Technologies Inc. - Byrna develops and sells less-lethal personal security solutions, targeting both consumer and professional markets [10]. - The expected revenue growth rate is 86.3%, with earnings growth exceeding 100%, and a stock price upside of 28.9% from an average target price of $19.42 [11]. Lifeway Foods Inc. - Lifeway produces probiotic-based products, primarily drinkable kefir, and markets them under various brand names [12]. - The company projects revenue and earnings growth rates of 24.8% and 32%, respectively, with a stock price upside of 21.6% from an average target price of $26.50 [13]. Willdan Group Inc. - Willdan provides professional and consulting services in energy and engineering [14]. - The expected revenue and earnings growth rates for Willdan are 29.5% and 20%, respectively, with a stock price upside of 19.2% from an average target price of $49 [15].