MW 11 fast-growing small-cap stocks that could get a boost from the Fed's next move
By Philip van Doorn
These companies are expected to continue growing revenue at a rapid pace through 2027
Investors are anticipating that the Federal Open Market Committee will cut the federal-funds rate on Sept. 17.
Small-cap stocks have lagged behind large-cap stocks this year and over the past five years - but the story is a bit more interesting than that, while the anticipated resumption of Federal Reserve interest-rate cuts might serve as a catalyst for shares of small-cap U.S. companies.
Lower short-term rates could be especially helpful for small-cap U.S. companies because of their focus on domestic sales and because a lower federal-funds rate might make for reduced borrowing costs.
In an email on Monday, Jay Woods, chief global strategist at Freedom Capital Markets in New York, wrote that investors might see "excessive volatility" following Federal Reserve Chair Jerome Powell's press conference Wednesday afternoon, following the Federal Open Market Committee's two-day policy meeting. But Woods also believes that any potential selloff for small-caps "should set us up for a rally later in the year and pick up steam as we head into the final earnings season of 2025."
Woods suggested that investors keep an eye on momentum. "If the Russell can keep it going and break out to new highs, then this bull market could be stronger than the most ardent bulls believe." He was referring to the Russell 2000 RUT, a commonly cited benchmark index for U.S. small-cap stocks.
Below is a screen of another index, the S&P Small Cap 600 SML, looking backward to highlight companies that have increased revenue quickly and looking ahead to see which ones are expected to grow most rapidly through 2027.
Despite the popularity of the Russell 2000 for money managers to benchmark against, we started with the S&P Small Cap 600 for a more conservative screen, because the Russell includes hundreds of unprofitable companies.
Companies must show four quarters of consecutive profitability as part of S&P Dow Jones Indices' criteria for initial inclusion in the S&P Small Cap 600. (You can learn more about the index here.)
Before screening the small caps, let's take a look at a five-year chart showing total returns, with dividends reinvested, for the S&P Small Cap 600 and the S&P 500 SPX, the large-cap U.S. benchmark index:
Five-year total returns with dividends reinvested.
The S&P 500 has been the better five-year performer - but you can see that for much of this period, the small-cap index was actually in the lead.
Now let's look at forward price-to-earnings ratios for the indexes. These are prices divided by rolling consensus 12-month earnings-per-share estimates, weighted by market capitalization:
Index Forward P/E Forward P/E to 5-year average Forward P/E to 10-year average Forward P/E to 20-year average
S&P Small Cap 600 15.5 102% 100% 106%
S&P 500 22.7 112% 120% 139%
Source: FactSet
The small-cap stocks as a group are trading at a much lower forward P/E ratio than the S&P 500, and are trading at modest premiums to their long-term average valuations. In contrast, the S&P 500 appears to be expensive relative to its long-term average valuations.
And the weighting by market cap underscores the argument for adding small-cap exposure for diversification. For example, the portfolio of the $664 billion SPDR S&P 500 ETF Trust SPY, which is designed to track the S&P 500 by holding all of its stocks, is 29% concentrated in five companies: Nvidia Corp. (NVDA), Microsoft Corp. $(MSFT)$, Apple Inc. $(AAPL)$, two common-share classes of Google parent Alphabet Inc. $(GOOGL)$ $(GOOG)$, and Amazon.com Inc. (AMZN)
Meanwhile, the largest five holdings of the Vanguard S&P Small-Cap 600 ETF VIOO made up only 3.6% of that fund as of Aug. 31.
Screening the S&P Small Cap 600
Starting with the S&P Small Cap 600 stocks, we decided to look back at revenue growth rates, and then look ahead for growth rates based on consensus estimates among analysts polled by FactSet.
All numbers driving the calculations are for calendar years, as adjusted by FactSet for any companies whose fiscal reporting periods don't match the calendar.
This is how we narrowed the list:
-- Starting with the S&P Small Cap 600, we cut the list to 221 companies that were profitable in 2022, 2023 and 2024, and are expected per analysts' consensus estimates to be profitable for 2025, 2026 and 2027. Estimates through 2027 aren't available for all companies. Any company for which any data or estimates were unavailable didn't make the first cut.
-- Then we cut the list of 221 remaining companies to 113 for which compound annual growth rates (CAGR) for revenue from 2022 through 2024 were at least 5.1%, or roughly twice the 2.6% revenue CAGR for the index.
-- Then we looked ahead and narrowed the list to 11 companies with expected revenue CAGR from 2025 through 2027 of at least 14%, or roughly three times the expected revenue CAGR of 4.7% for the index.
Here are the 11 small-cap companies that passed the screen, sorted by expected revenue CAGR from 2025 through 2027:
Company Ticker Industry 2-year estimated sales CAGR through 2027 Corcept Therapeutics Inc.. CORT Pharmaceuticals 41.6% LTC Properties Inc. LTC Real estate investment trusts 32.1% Goosehead Insurance Inc. GSHD Insurance brokers/services 22.8% Astrana Health Inc. ASTH Health services 18.8% Enova International Inc. ENVA Finance/rental/;easing 17.7% Palomar Holdings Inc. PLMR Property/casualty insurance 16.0% Harmony Biosciences Holdings Inc. HRMY Pharmaceuticals 15.9% Kinetik Holdings Inc. KNTK Oil-and-gas pipelines 15.7% Agilysys Inc. AGYS Software 14.8% Sterling Infrastructure Inc. STRL Engineering and construction 14.6% HA Sustainable Infrastructure Capital Inc. HASI Investment managers 14.3% Source: FactSet
Here is a summary of analysts' opinions about these stocks:
Company Ticker Sept. 12 price Consensus price target Implied 12-month upside potential Share "buy" ratings
Corcept Therapeutics Inc. CORT $72.87 $135.25 86% 100%
LTC Properties Inc. LTC $36.22 $37.83 4% 17%
Goosehead Insurance Inc. Class A GSHD $80.67 $111.55 38% 42%
Astrana Health Inc. ASTH $29.83 $45.00 51% 80%
Enova International Inc. ENVA $115.14 $131.13 14% 88%
Palomar Holdings Inc. PLMR $116.84 $165.33 42% 67%
Harmony Biosciences Holdings Inc. HRMY $32.39 $50.64 56% 82%
Kinetik Holdings Inc. KNTK $43.73 $52.09 19% 60%
Agilysys Inc. AGYS $105.88 $130.40 23% 86%
Sterling Infrastructure Inc. STRL $313.56 $355.00 13% 100%
HA Sustainable Infrastructure Capital Inc. HASI $27.95 $38.47 38% 88%
Source: FactSet
The analysts have majority "buy" or equivalent ratings for all but two of the stocks, and they see double-digit upside for all with majority "buy" ratings.
Any stock-screen list is limited to a small set of data. If you are considering any of these companies for investment, you should do your own research and form your own opinion about the company's prospects for remaining competitive over the next decade. One way to begin the research is by clicking on the MarketWatch tickers for any stock, index or ETF for more information.
Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page
Don't miss: 20 stocks to consider if you want alternatives to the expensive S&P 500
-Philip van Doorn
MW 11 fast-growing small-cap stocks that could get a boost from the Fed's next move
By Philip van Doorn
These companies are expected to continue growing revenue at a rapid pace through 2027
Investors are anticipating that the Federal Open Market Committee will cut the federal-funds rate on Sept. 17.
Small-cap stocks have lagged behind large-cap stocks this year and over the past five years - but the story is a bit more interesting than that, while the anticipated resumption of Federal Reserve interest-rate cuts might serve as a catalyst for shares of small-cap U.S. companies.
Lower short-term rates could be especially helpful for small-cap U.S. companies because of their focus on domestic sales and because a lower federal-funds rate might make for reduced borrowing costs.
In an email on Monday, Jay Woods, chief global strategist at Freedom Capital Markets in New York, wrote that investors might see "excessive volatility" following Federal Reserve Chair Jerome Powell's press conference Wednesday afternoon, following the Federal Open Market Committee's two-day policy meeting. But Woods also believes that any potential selloff for small-caps "should set us up for a rally later in the year and pick up steam as we head into the final earnings season of 2025."
Woods suggested that investors keep an eye on momentum. "If the Russell can keep it going and break out to new highs, then this bull market could be stronger than the most ardent bulls believe." He was referring to the Russell 2000 RUT, a commonly cited benchmark index for U.S. small-cap stocks.
Below is a screen of another index, the S&P Small Cap 600 SML, looking backward to highlight companies that have increased revenue quickly and looking ahead to see which ones are expected to grow most rapidly through 2027.
Despite the popularity of the Russell 2000 for money managers to benchmark against, we started with the S&P Small Cap 600 for a more conservative screen, because the Russell includes hundreds of unprofitable companies.
Companies must show four quarters of consecutive profitability as part of S&P Dow Jones Indices' criteria for initial inclusion in the S&P Small Cap 600. (You can learn more about the index here.)
Before screening the small caps, let's take a look at a five-year chart showing total returns, with dividends reinvested, for the S&P Small Cap 600 and the S&P 500 SPX, the large-cap U.S. benchmark index:
Five-year total returns with dividends reinvested.
The S&P 500 has been the better five-year performer - but you can see that for much of this period, the small-cap index was actually in the lead.
Now let's look at forward price-to-earnings ratios for the indexes. These are prices divided by rolling consensus 12-month earnings-per-share estimates, weighted by market capitalization:
Index Forward P/E Forward P/E to 5-year average Forward P/E to 10-year average Forward P/E to 20-year average
S&P Small Cap 600 15.5 102% 100% 106%
S&P 500 22.7 112% 120% 139%
Source: FactSet
The small-cap stocks as a group are trading at a much lower forward P/E ratio than the S&P 500, and are trading at modest premiums to their long-term average valuations. In contrast, the S&P 500 appears to be expensive relative to its long-term average valuations.
And the weighting by market cap underscores the argument for adding small-cap exposure for diversification. For example, the portfolio of the $664 billion SPDR S&P 500 ETF Trust SPY, which is designed to track the S&P 500 by holding all of its stocks, is 29% concentrated in five companies: Nvidia Corp. (NVDA), Microsoft Corp. (MSFT), Apple Inc. (AAPL), two common-share classes of Google parent Alphabet Inc. (GOOGL) (GOOG), and Amazon.com Inc. (AMZN)
Meanwhile, the largest five holdings of the Vanguard S&P Small-Cap 600 ETF VIOO made up only 3.6% of that fund as of Aug. 31.
Screening the S&P Small Cap 600
Starting with the S&P Small Cap 600 stocks, we decided to look back at revenue growth rates, and then look ahead for growth rates based on consensus estimates among analysts polled by FactSet.
All numbers driving the calculations are for calendar years, as adjusted by FactSet for any companies whose fiscal reporting periods don't match the calendar.
This is how we narrowed the list:
-- Starting with the S&P Small Cap 600, we cut the list to 221 companies that were profitable in 2022, 2023 and 2024, and are expected per analysts' consensus estimates to be profitable for 2025, 2026 and 2027. Estimates through 2027 aren't available for all companies. Any company for which any data or estimates were unavailable didn't make the first cut.
-- Then we cut the list of 221 remaining companies to 113 for which compound annual growth rates (CAGR) for revenue from 2022 through 2024 were at least 5.1%, or roughly twice the 2.6% revenue CAGR for the index.
-- Then we looked ahead and narrowed the list to 11 companies with expected revenue CAGR from 2025 through 2027 of at least 14%, or roughly three times the expected revenue CAGR of 4.7% for the index.
Here are the 11 small-cap companies that passed the screen, sorted by expected revenue CAGR from 2025 through 2027:
Company Ticker Industry 2-year estimated sales CAGR through 2027
Corcept Therapeutics Inc.. CORT Pharmaceuticals 41.6%
LTC Properties Inc. LTC Real estate investment trusts 32.1%
Goosehead Insurance Inc. GSHD Insurance brokers/services 22.8%
Astrana Health Inc. ASTH Health services 18.8%
Enova International Inc. ENVA Finance/rental/;easing 17.7%
Palomar Holdings Inc. PLMR Property/casualty insurance 16.0%
Harmony Biosciences Holdings Inc. HRMY Pharmaceuticals 15.9%
Kinetik Holdings Inc. KNTK Oil-and-gas pipelines 15.7%
Agilysys Inc. AGYS Software 14.8%
Sterling Infrastructure Inc. STRL Engineering and construction 14.6%
HA Sustainable Infrastructure Capital Inc. HASI Investment managers 14.3%
Source: FactSet
Here is a summary of analysts' opinions about these stocks:
Company Ticker Sept. 12 price Consensus price target Implied 12-month upside potential Share "buy" ratings
Corcept Therapeutics Inc. CORT $72.87 $135.25 86% 100%
LTC Properties Inc. LTC $36.22 $37.83 4% 17%
Goosehead Insurance Inc. Class A GSHD $80.67 $111.55 38% 42%
Astrana Health Inc. ASTH $29.83 $45.00 51% 80%
Enova International Inc. ENVA $115.14 $131.13 14% 88%
Palomar Holdings Inc. PLMR $116.84 $165.33 42% 67%
Harmony Biosciences Holdings Inc. HRMY $32.39 $50.64 56% 82%
Kinetik Holdings Inc. KNTK $43.73 $52.09 19% 60%
Agilysys Inc. AGYS $105.88 $130.40 23% 86%
Sterling Infrastructure Inc. STRL $313.56 $355.00 13% 100%
HA Sustainable Infrastructure Capital Inc. HASI $27.95 $38.47 38% 88%
Source: FactSet
The analysts have majority "buy" or equivalent ratings for all but two of the stocks, and they see double-digit upside for all with majority "buy" ratings.
Any stock-screen list is limited to a small set of data. If you are considering any of these companies for investment, you should do your own research and form your own opinion about the company's prospects for remaining competitive over the next decade. One way to begin the research is by clicking on the MarketWatch tickers for any stock, index or ETF for more information.
Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page
Don't miss: 20 stocks to consider if you want alternatives to the expensive S&P 500
-Philip van Doorn
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September 15, 2025 14:18 ET (18:18 GMT)
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