2 Small-Cap Stocks Set to Shine in a Bull Market

Key Points

• Small-cap stocks often outperform during bullish markets, benefiting from their growth-oriented nature and sensitivity to improving economic conditions.
• Their agility allows for rapid revenue and earnings growth, making them attractive in high-confidence, high-reward scenarios.
• The iShares Russell 2000 ETF has surged over 13% this quarter, showcasing increased investor interest in small-cap opportunities into year-end.

Small-cap stocks often experience outsized gains during bullish markets. Their smaller market capitalizations and growth-oriented profiles make them more sensitive to improving economic conditions, where rising investor confidence drives capital toward higher-risk, higher-reward opportunities. These companies are nimble in nature, with some often delivering rapid revenue and earnings growth, which can translate into significant valuation increases.

The iShares Russell 2000 ETF NYSE: IWM, representing the small-cap sector, has surged over 13% this quarter alone, highlighting the current investor appetite for these opportunities. With the market momentum carrying into year-end, some small-cap stocks trading under $5, especially those showing positive earnings growth, deserve closer attention.

2 Small-Cap Stocks With Positive EPS Growth Trading Under $5

CureVac: Extends Cash Runway Past 2028 With $583.4M on Balance Sheet

CureVac NASDAQ: CVAC, a biopharmaceutical company specializing in mRNA-based medicines, is building an impressive pipeline that includes vaccines for infectious diseases and therapies for oncology. The company’s promising product candidates include second-generation COVID-19 vaccines and seasonal flu treatments developed in collaboration with GSK. CureVac also has active trials for mRNA-based therapies targeting melanoma and other cancers.

Although the stock has struggled in 2024, down 24% YTD, CureVac’s Q3 results suggest brighter days ahead. It reported a 3000% year-over-year revenue increase to $520 million, fueled by a $423.5 million upfront payment from its revised partnership with GSK. The collaboration extends CureVac’s cash runway beyond 2028, with $583.4 million now on its balance sheet. Furthermore, the company achieved an EPS of $1.54, easily beating estimates.

CureVac’s valuation looks appealing, trading at a P/E ratio of 5.91 with a current ratio of 6.2, signifying strong liquidity. Analysts have set a price target of $10, representing a potential upside of over 200%. However, recent data shows mixed institutional sentiment: Point72 Asset Management reduced its holdings by 67.8% last quarter. While this raises questions, it also provides an entry point for those confident in CureVac’s long-term potential.

HeartCore Expands Recurring Revenue With Multi-Year Licensing Agreements

HeartCore Enterprises NASDAQ: HTCR, a Japan-based software development company, focuses on enhancing customer experience through its suite of SaaS solutions. Its offerings include marketing automation, content management systems (CMS), and digital transformation tools, such as robotic process automation. HeartCore has also entered multi-year licensing agreements, signaling a shift to more predictable recurring revenue streams.

Unlike CureVac, HeartCore has seen its stock soar in 2024, up 150% YTD, with nearly 140% of that gain occurring this quarter. This rally is supported by its Q3 results, where HeartCore exceeded both revenue and earnings expectations. The company reported $0.53 EPS, beating consensus estimates by over 50%, on $17.85 million in revenue. Recent strategic initiatives, including a new “Health Check” consultation program, aim to deepen customer relationships and unlock further sales growth.

HeartCore has a client retention rate of 25.9% exceeding 10 years, and the company projects a 12% increase in sales from its CMS customers in FY 2025. Despite its strong performance and forward momentum, HeartCore remains under the radar, with minimal analyst coverage and low institutional ownership. Its market capitalization of just $33 million makes it a speculative play but also an attractive opportunity for early investors willing to embrace higher risk and conduct further due diligence on the company and its sector.

Investors looking to capitalize on the current bull market in small caps should weigh the risks and rewards carefully. While these stocks offer compelling growth narratives, their small market capitalizations, and high volatility require a disciplined approach. For those willing to take a closer look, these two stocks may present unique opportunities in an otherwise speculative market.