3 Breakout Small-Cap Stocks Outperforming the Market

Small-cap stocks have lagged the rest of the market by a significant margin so far in 2023. This is evidenced by the fact that the small-cap focused Russell 2000 Index (RUT) is roughly flat on the year, while the Nasdaq Composite ($NASX) has gained about 30%, and the S&P 500 Index ($SPX) is more than 13% higher.

That small-cap underperformance has continued in recent months, too, as heightened volatility has pressured markets lower across the board. Since the start of August, the RUT is off more than 11%, while the Nasdaq and S&P have pulled back about 5% each in this time frame.

Against this backdrop, the positive price action we've seen lately in the three small-cap stocks featured below is truly impressive. Here's what Wall Street is expecting next for these relative strength standouts.

Uranium Energy

Founded in 2003, Uranium Energy (UEC) is a Texas-based uranium mining and exploration company. It has a portfolio of uranium projects in the U.S., including two in situ recovery (ISR) uranium production facilities in Wyoming, and two ISR uranium projects under development in Texas. 

Commanding a market cap of about $2.07 billion, Uranium Energy shares have rallied nearly 46% just since the beginning of August. That coincides with a ramp higher in uranium futures (UXZ23), as well, with a new bull market in place for the commodity - and forecasts looking bullish.

In its latest results, for the quarter ended in July, Uranium Energy reported revenue of $164 million after it sold 3.15 million pounds of uranium. It recorded gross profits of $49.6 million, with an adjusted loss of $0.02 per share. 

Meanwhile, the company has been fortifying its portfolio with some notable acquisitions, chief among them being the purchase of Canadian exploration projects from Rio Tinto for CAD$1.5 million. The deal will add an additional ~44k acres to UEC's land holdings in the Basin, which now totals more than 1M acres. Further, the company also completed the buyout of Canada-based UEX Corp in June, and in October, it purchased the Roughrider uranium development project from Rio in a $150 million cash and stock deal.

Notably, the company also announced the completion of the Restart Program at its Christensen Ranch ISR project in Wyoming.

All four analysts covering the stock have a “Strong Buy” rating with a mean target price of $6.62. This indicates an upside potential of about 25% from current levels. 

Peabody Energy

We continue our list with Peabody Energy (BTU), a leading global coal producer. Peabody mines and sells coal to utilities and industrial customers in more than 25 countries, which is then used to generate electricity, produce steel and other industrial products, and make cement and other building materials. 

The company currently commands a market cap of $3.46 billion and offers shareholders a dividend yield of 0.57%.

Peabody Energy stock is up more than 15% since the start of August, extending a longer-term rise off its May lows.

For its latest quarter ended June 2023, the company reported lower revenue and earnings - like most energy companies, due to softer commodity prices. Revenues of $1.27 billion were down 4% from the prior year, while EPS came in at $1.16 - missing consensus expectations for $1.72.

Looking ahead, strength in coal prices could be key for BTU. Bank of America says prices likely bottomed in July, and the October futures contract (LQV23) just set a higher low earlier this month. Plus, ongoing conflict between Russia and Ukraine could stoke European demand this winter.

Analysts have assigned a “Strong Buy” rating for the stock with a mean target price of $30.25, which denotes an upside potential of about 16% from current levels. Out of four analysts covering the stock, 3 have a “Strong Buy” rating and 1 has a “Hold” rating.

Cinemark Holdings

We round out our list with the leading global cinema chain, Cinemark (CNK). Founded in 1984, the chain has 530 theaters and 5,969 screens in 11 countries. Cinemark operates theatres under several brands, including its flagship Cinemark, Century Theatres, Tinseltown, CinéArts, and Rave Cinemas.

Currently commanding a market cap of $2.29 billion, its shares have rallied massively in 2023, gaining 112% as audiences flocked back to theaters. Since the start of August alone, CNK is up 10.5%.

Cinemark reported stellar results for the second quarter that ended June, highlighted by a significant increase in revenue and a swing to profitability. Revenues of $942.3 million were up 26.6% year over year, aided by a substantial rise in admissions and concessions revenue. Meanwhile, EPS of $0.80 comfortably outpaced the consensus estimate of $0.54, and also compared favorably to the previous year's loss of $0.61 per share.

Growth in average ticket prices (up 1.2% YoY) and operating cash flows (up 445% YoY) further fueled investors' enthusiastic reaction to the results.

Analysts remain cautiously optimistic about the stock, with a consensus “Moderate Buy” rating and a mean target price of $19.65. This denotes an upside potential of only about 6.4% from current levels - although the Street-high target price of $24 suggests an impressive upside potential of nearly 30%. 

Out of 10 analysts covering the stock, 5 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 3 have a “Hold” rating, and 1 has a “Strong Sell” rating.