This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

6 Strong Small Cap Stocks For A Growing Economy

Stocks in this article: BITA CSII DL DWRE TEAR XRS

James Dennin, Kapitall: This year small cap stocks – market cap between $300 million and $2 billion – grew twice as fast as the market. 

There have been mixed signs from the economy this fall. Unemployment numbers have been static, US factory output increased slower than expected, and a number of important American companies like IBM (IBM) and Caterpillar (CAT) missed their earnings estimates looking ahead into the next year.

[Read more from Kapitall: Deal or No Deal: 6 Stocks Under 5 Dollars Trading Below Book Value]

Which begs the question, what sort of recovery this is, exactly? Economic growth has been the slowest it's been since during World War II. And yet, amidst all the lukewarm and confusing news, a Bloomberg study of the year's economic data has given economists one cause for optimism.

Over the last year, small cap stocks have grown at double the rate of larger companies – and that's an important statistic for a number of reasons.

For one, smaller companies generally tend to do most of their business domestically. The fact that investors are moving their money into stocks that get their profits from the US indicates a greater level of confidence domestically.

On top of that, in three of the four times that this situation has occurred, robust growth for small cap stocks led to greater growth for the economy as a whole in the following year. 

Investing ideas

Small cap stocks are usually growth stocks. They are unlikely to pay dividends, and they often have less economic data available than larger companies who have been around longer. Investors usually look for small cap stocks that have a lot of room to grow, as that's where they are most likely to see a return on their investment. 

We decided to screen for small cap stocks using two major parameters: strong  sales growth over the last 5 years, and projected earnings per share (EPS) growth over the next 5 years above 20% – a sign of high growth in the future.

Since companies can fix their balance sheets in the short term by borrowing money, we also wanted to make sure that these stocks weren't holding too much debt – in this case under $0.30 cents on the dollar as indicated by their long-term debt to equity ratio (LT Debt/Equity).

We were left with six stocks on our list. 

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs