3 Small Caps with Bullish Charts and Analysts

Wouldn’t it be great if a stock’s chart and fundamentals said the same thing? It doesn’t always happen, but when it does, it can sure strengthen a bullish investment thesis.

Classic chart patterns emerge daily across capitalizations and sectors. So do the opinions of sell-side research firms who continually evaluate company fundamentals. Sometimes the stars align and buy signals are flashed by both.

Small-cap stocks generally have less analyst coverage than their large-cap counterparts. Rating and price target changes tend to occur less frequently but pack a more powerful punch. On the other hand, chart patterns form on their own regardless of a stock’s size.  

Combining the higher upside potential of small-cap stocks with bullish chart formations can be a winning strategy for investors willing to bear more risk. Here are three intriguing small-cap names that check both boxes.

Is Central Garden & Pet’s Stock Chart Bullish?

A head and shoulders bottom pattern has formed on Central Garden & Pet’s (NASDAQ: CENT) daily chart. This classic shape predicts that a previously bearish trend is giving way to a bullish reversal. The downtrend began in March 2021 when the stock climbed above $60 only to slide back into the mid-$40’s. Last month’s bullish MACD crossover in good volume also suggests that the bulls have regained control.

Central Garden & Pet’s fundamentals have also been trending in the right direction. The company has beat consensus earnings estimates in each of the last seven quarters largely due to growing demand for garden products such as live plants, fertilizer, and wild bird feed. Although management upped its full year guidance last time around, the bar is set low for the next quarterly report. Higher commodity, freight, and labor costs are expected to weigh on near-term results.

These headwinds are expected to dissipate heading into next year though when analysts see earnings per share increasing 12% off a very strong 2021 performance. Central Garden & Pet’s unique exposure to two growing markets, collection of well-known brands, and bullish technical trends make it worth cultivating a new position here. 

Will Harsco Beat the Q3 EPS Consensus?

On Wednesday, Harsco (NYSE: HSC) recently completed a double bottom on its daily chart. The stock has repeatedly received support around the $15 to $16 level this year and may finally be looking to resume the uptrend that began at last year’s market lows. If it can continue to stay above the $17 level, the “w-shaped” double bottom suggests momentum will be to the upside.

Harsco also has bullish Wall Street sentiment in its favor. Earlier this week, research firm Barrington reiterated its ‘buy’ rating on the diversified industrial company with a $26 price target that implies more than 50% upside. The other two firms that cover the small cap stock, Stifel Nicholas and Argus Research, also call Harsco a buy and agree it could head into the $25 to $30 range.

When Harsco reports third-quarter results before the open on November 2^nd, it will be bringing a six-quarter streak of quarterly earnings beats. Last quarter was the company’s best bottom-line result since the pandemic began. All three segments—Environmental, Clean Earth, and Rail—performed well as the economic recovery brought improved demand for industrial waste solutions and railroad technologies.

The Street’s forecast for third-quarter EPS is at the low end of management’s $0.23 to $0.29 guidance range following a $0.28 result in Q2. Look for Harsco to stretch its positive earnings surprise streak to seven and the stock to bounce off the double bottom.

Is e.l.f. Beauty Stock a Buy?

e.l.f. Beauty (NYSE: ELF) has the wind at its back heading into Wednesday’s fiscal Q2 release. From the technical analysis perspective, a continuation diamond pattern has the stock rallying into earnings and within pennies of eclipsing its record intraday high from five years ago. The classic chart pattern points to a late year rally after a summer swoon for the cosmetics specialist.

It wasn’t long ago that taking a bullish stance on e.l.f. Beauty felt like putting lipstick on a pig. Closed beauty product retailers and salons led to slumping sales and the stock price nearly retreated to an all-time low. The company’s makeover since then has been nothing short of stunning. Sales and profits are on the rise thanks to reopened beauty and mass market channels as well as the success of new product launches like the Alicia Keys-inspired Keys Soulcare line.

e.l.f. Beauty is gaining market share in its core color cosmetics business and leaving the competition looking pale. Last quarter it was the only leading color cosmetic brand to grow beyond pre-pandemic levels and pick up market share in the process. The Street has taken notice and is overwhelmingly bullish on the stock. Although current price targets imply little upside from here, there’s a good chance they get upwardly revised if management can once again exceed expectations.