How To Screen For Top Small Cap Value Stocks

While big caps continue to dominate Wall Street, suddenly, in November 2020, the Russell 2000, the small cap index, finally broke out to new all-time highs for the first time in 2 years.

Small caps had their best month ever in November. While that included small cap growth and value stocks, value still crushed it in the month.

The Vanguard Small Cap Value ETF jumped 19% in the last month.

But even with the recent breakout, the small caps continue to underperform.

Over the past 2 years the Vanguard Small Cap Value ETF is up just 4.8% compared to the S&P 500’s 33%.

Many small cap stocks remain cheap heading into 2021.

Screening for Small Cap Value

It’s pretty easy to create a small cap value stock screen.

Small caps can be considered companies with a market cap under $2 billion, $1.5 billion or even $1 billion, depending on how narrow you want to make the screen.

For this screen, Tracey went with $1.5 billion.

Adding on the powerful Zacks Ranks of #1 (Strong Buy) or #2 (Buy) should hopefully get you companies that have rising earnings estimates. The analysts see something good going on that they are raising, instead of cutting, those full-year estimates.

For the value component, you can try the basic price-to-earnings ratio under 15 but in this screen, that combination produced 164 stocks.

That’s a lot of stocks.

Adding on the price-to-sales ratio under 1.0 narrows the screen.

It produced 60 stocks.

5 Small Cap Value Stocks with High Zacks Ranks

1.   Bassett Furniture (BSET - Free Reportis cashing in on the housing craze. In September, the company said its wholesale order rate was up 39% year-over-year. Bassett said business had “boomed” since Memorial Day. It’s still cheap with a forward P/E of 13.4.

2.   Beazer Homes (BZH - Free Reportis a home builder with a market cap of $451 million. While earnings are expected to rise 2.1% in fiscal 2021, they’re forecast to rise another 25% in fiscal 2022. It’s dirt cheap with a forward P/E of 7.5.

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Disclaimer: Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the  more

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