10 Best-Performing Small-Cap Stocks in 2016

Editors' pick: Originally published Jan. 21.

Small-cap stocks are taking a beating this month due to the market volatility, even more so than large-cap stocks.

The Russell 2000 Index is down 11.5% this year, while the S&P 500 is down more than 8% -- but that doesn't meant that all stocks are in the red. There are outliers even among small-cap stocks that have had significant outperformance in the first three weeks of the year.

But are small-cap stocks really the best place to put your money right now? Oppenheimer analysts noted this week that investors are better off buying large-cap growth stocks that have been oversold as opposed to small-cap value stocks that are seeing a bump.

Still, if you're looking to exposure to small-caps, here are 10 stocks among the Russell 2000 that have had the best performance this year. We've paired the list with commentary from Jim Cramer, if the stock is owned by his Action Alerts PLUS Charitable Trust Portfolio, or ratings from TheStreet Ratings, TheStreet's proprietary ratings tool, for another perspective.

TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equity market returns, future interest rates, implied industry outlook and forecasted company earnings.

 

 

 

 

10. Children's Place
10. Children's Place

(PLCE - Get Report)
Consumer Goods & Services/Apparel Retail
Market Cap: $1.3 billion
2016 Return: 16.4%

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

"We rate Children's Place as a buy with a ratings score of B. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, expanding profit margins, increase in net income, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings team include:

  • Children's Place has improved earnings per share by 10.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Children's Place increased its bottom line by earning $2.61 versus $2.31 in the prior year. This year, the market expects an improvement in earnings ($3.54 versus $2.61).
  • 39.59% is the gross profit margin for Children's Place which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.44% is above that of the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 4.2% when compared to the same quarter one year prior, going from $36.94 million to $38.50 million.
  • Children's Place's debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.76 is somewhat weak and could be cause for future problems.
  • Children's Place, with its decline in revenue, underperformed when compared the industry average of 4.5%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: PLCE

9. Rouse Properties
9. Rouse Properties

(RSE)
Financial Services/Retail REITs
Market Cap: $1 billion
2016 Return: 20.1%

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

"We rate Rouse Properties as a hold with a ratings score of C-. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings team include:

  • Rouse Properties reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, Rouse Properties continued to lose money by earning -$0.90 versus -$0.92 in the prior year. This year, the market expects an improvement in earnings ($0.72 versus -$0.90).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the REITs industry. The net income increased by 95.1% when compared to the same quarter one year prior, rising from -$26.56 million to -$1.30 million.
  • Rouse Properties, with its decline in revenue, slightly underperformed the industry average of 6.1%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for Rouse Properties is currently lower than what is desirable, coming in at 33.11%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, Rouse Properties' net profit margin of -1.77% significantly underperformed when compared to the industry average.
  • Net operating cash flow has decreased to $20.74 million or 26.18% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: RSE

8. Nautilus
8. Nautilus

(NLS - Get Report)
Consumer Goods & Services/Leisure Stores
Market Cap: $630 million
2016 Return: 20.8%

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

"We rate Nautilus as a buy with a ratings score of B+. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, compelling growth in net income and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings team include:

  • The revenue growth came in higher than the industry average of 3.9%. Since the same quarter one year prior, revenues rose by 19.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Nautilus has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, NLS has a quick ratio of 1.87, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Leisure Equipment & Products industry. The net income increased by 49.9% when compared to the same quarter one year prior, rising from $2.49 million to $3.73 million.
  • Net operating cash flow has significantly increased by 98.57% to -$0.20 million when compared to the same quarter last year. In addition, Nautilus has also vastly surpassed the industry average cash flow growth rate of 7.92%.
  • You can view the full analysis from the report here: NLS

 

7. Burlington Stores
7. Burlington Stores

(BURL - Get Report)
Consumer Goods & Services/General Merchandise Stores
Market Cap: $3.8 billion
2016 Return: 21.6%

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

"We rate Burlington Stores as a sell with a ratings score of D. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been a decline in the stock price during the past year."

Highlights from the analysis by TheStreet Ratings team include:

  • After a year of stock price fluctuations, the net result is that Burlington Stores' price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • 40.13% is the gross profit margin for Burlington Stores which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 1.22% trails the industry average.
  • Net operating cash flow has significantly increased by 182.74% to $104.41 million when compared to the same quarter last year. In addition, Burlington Stores has also vastly surpassed the industry average cash flow growth rate of 81.22%.
  • Burlington Stores reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, Burlington Stores increased its bottom line by earning $0.85 versus $0.61 in the prior year. This year, the market expects an improvement in earnings ($2.29 versus $0.85).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Multiline Retail industry. The net income increased by 144.2% when compared to the same quarter one year prior, rising from -$34.21 million to $15.11 million.
  • You can view the full analysis from the report here: BURL

6. Sientra
6. Sientra

(SIEN - Get Report)
Health Care/Health Care Supplies
Market Cap: $133 million
2016 Return: 24%

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

"We rate Sientra as a sell with a ratings score of D-. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share and deteriorating net income."

Highlights from the analysis by TheStreet Ratings team include:

  • Sientra has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. For the next year, the market is expecting a contraction of 129.4% in earnings (-$1.17 versus -$0.51).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income has significantly decreased by 354.8% when compared to the same quarter one year ago, falling from -$1.45 million to -$6.60 million.
  • The revenue fell significantly faster than the industry average of 29.4%. Since the same quarter one year prior, revenues slightly dropped by 6.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for Sientra is currently very high, coming in at 71.26%. Regardless of Sientra's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, Sientra's net profit margin of -66.51% significantly underperformed when compared to the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 50.39%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 168.75% compared to the year-earlier quarter.
  • You can view the full analysis from the report here: SIEN

5. RMR Group
5. RMR Group

(RMR - Get Report)
Financial Services/REITs
Market Cap: $303 million
2016 Return: 31.3%

There is no TheStreet Ratings data for RMR Group at this time.

4. Affymetrix
4. Affymetrix

(AFFX)
Health Care/Life Sciences & Tools
Market Cap: $1.1 billion
2016 Return: 37.2%

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

"We rate Affymetrix as a Hold with a ratings score of C. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive."

Highlights from the analysis by TheStreet Ratings team include:

  • The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 2.61, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has increased to $23.12 million or 11.71% when compared to the same quarter last year. In addition, Affymetrix has also modestly surpassed the industry average cash flow growth rate of 7.11%.
  • Affymetrix has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Affymetrix continued to lose money by earning -$0.07 versus -$0.27 in the prior year. This year, the market expects an improvement in earnings ($0.42 versus -$0.07).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Life Sciences Tools & Services industry and the overall market, Affymetrix's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Life Sciences Tools & Services industry. The net income has significantly decreased by 323.8% when compared to the same quarter one year ago, falling from $2.38 million to -$5.34 million.
  • You can view the full analysis from the report here: AFFX

 

3. Unilife
3. Unilife

(UNIS)
Health Care/Health Care Supplies
Market Cap: $93 million
2016 Return: 43.5%

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

"We rate Unilife as a sell with a ratings score of D-. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings team include:

  • Unilife's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 85.13%, which is also worse than the performance of the S&P 500 Index. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Net operating cash flow has declined marginally to -$13.62 million or 3.93% when compared to the same quarter last year. Despite a decrease in cash flow Unilife is still fairing well by exceeding its industry average cash flow growth rate of -16.70%.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Health Care Equipment & Supplies industry average, but is less than that of the S&P 500. The net income has decreased by 16.2% when compared to the same quarter one year ago, dropping from -$22.26 million to -$25.86 million.
  • Unilife reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, Unilife reported poor results of -$0.81 versus -$0.59 in the prior year. This year, the market expects an improvement in earnings (-$0.42 versus -$0.81).
  • The gross profit margin for Unilife is currently very high, coming in at 100.00%. Unilife has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, UNIS's net profit margin of -811.54% significantly underperformed when compared to the industry average.
  • You can view the full analysis from the report here: UNIS

2. Zafgen
2. Zafgen

(ZFGN)
Health Care/Pharmaceuticals
Market Cap: $265.5 million
2016 Return: 56.7%

There is no TheStreet Ratings data available for Zafgen at this time.

1. VirnetX
1. VirnetX

(VHC)
Technology/Internet Software & Services
Market Cap: $222 million
2016 Return: 62.6%

There is no TheStreet Ratings data available for VirnetX at this time.

 

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