4 Small Cap Stocks Boasting Strong Fundamentals and Impressive Momentum

Small-Cap Stocks with Strong Fundamentals and Upward Momentum

Current market movements are influenced by a variety of macroeconomic factors, including uncertainty over AI investments, rising geopolitical risks in the Middle East, and increasing pressures in private credit markets. While it can be beneficial to follow these prevailing trends, sometimes the best investment opportunities are found by looking past them.

At its essence, successful investing involves pinpointing companies with resilient business models, robust growth prospects, and valuations that accurately reflect their potential. When these solid fundamentals are matched with favorable technical patterns, the investment case becomes even more attractive. Small-cap stocks often present these opportunities, as many large institutional investors overlook them, creating inefficiencies that agile investors can take advantage of.

Applying this approach, I screened for companies with top Zacks Ranks, PEG ratios under 1, and year-to-date performance outpacing the broader market. Four standout stocks emerged: Phibro Animal Health , Deluxe , Remitly Global , and BrightSpring Health Services, Inc.. Each of these companies combines strong business fundamentals with positive momentum, making them worthy of further analysis.

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Phibro Animal Health Approaches All-Time Highs

Phibro Animal Health operates quietly at the heart of the global livestock and animal nutrition industry. The company benefits from steady, ongoing demand linked to worldwide protein consumption, which supports a stable and defensible business model.

One of the most notable aspects is the consistent upward trend in earnings estimates over the past year, reinforcing its Zacks Rank #1 (Strong Buy) and highlighting strengthening fundamentals.

Phibro’s valuation remains attractive relative to its growth outlook. The stock trades at 17.6 times forward earnings with a PEG ratio of 0.82, backed by an anticipated annual EPS growth rate of 21.5% over the next three to five years. This suggests that the company’s growth potential is not fully reflected in its current price. Technically, the stock is just below its record highs, indicating strong buying interest and the possibility of further gains.

Deluxe Poised for a Breakout

Deluxe has transformed from its origins in check printing into a diversified provider of payment, data, and marketing solutions for small and mid-sized businesses. The company now generates a growing share of revenue from higher-margin digital services, such as merchant processing, payroll and HR tools, and data-driven marketing platforms. This shift toward recurring, technology-based income streams has stabilized the business and improved profitability, positioning Deluxe as a blend of traditional services and modern fintech capabilities.

With a Zacks Rank #2 (Buy), Deluxe has seen sentiment improve as its transition to higher-margin services gains traction.

Deluxe’s shares are particularly appealing from a valuation perspective, trading at just 6.7 times forward earnings, with expected annual EPS growth of 12%, resulting in a low PEG ratio of 0.55. This combination of reasonable growth and discounted valuation offers an attractive risk/reward profile. Technically, the stock is consolidating in a bullish flag pattern, and a breakout could trigger a re-rating as investors recognize the value gap.

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Remitly Global Advances Through Business Transformation

Remitly Global operates a vital platform for cross-border payments, serving millions of users worldwide. This essential service underpins strong, sustainable revenue growth, with sales expected to increase by nearly 20% annually over the next two years.

Although the stock trades at a higher multiple—about 30 times forward earnings—this is justified by its impressive growth profile. EPS is forecasted to rise at a 55.3% annual rate over the next three to five years, resulting in a PEG ratio of just 0.54.

This positions RELY as a high-growth opportunity that remains attractively valued relative to its earnings trajectory. With a Zacks Rank #2 (Buy) and ongoing operating leverage as the platform scales, Remitly is well-placed for both strong performance and potential valuation expansion.

BrightSpring Health Services: A Standout in Healthcare

BrightSpring Health Services is strategically positioned to benefit from demographic trends, particularly the growing need for home and community-based care as the population ages. This places BTSG in a favorable spot within the healthcare sector. The company’s Zacks Rank #1 (Strong Buy) reflects robust earnings momentum and rising expectations.

While trading at 25.8 times forward earnings, this valuation is supported by projected annual EPS growth of 47.2% over the next three to five years, making for an appealing growth-adjusted profile.

BrightSpring’s technical performance is also noteworthy. The stock has shown a steady upward trend with minimal volatility, often a sign of accumulation by long-term investors. If this demand continues, the stock could maintain its upward path alongside its strong fundamentals.

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Are PAHC, DLX, RELY, and BTSG Worth Considering?

Opportunities like these often arise when the market’s focus is elsewhere. While macroeconomic themes dominate the news, these four small-cap companies stand out for their earnings momentum, attractive valuations relative to growth, and constructive technical setups. In a market where many sectors are crowded, these stocks offer a unique way to seek outperformance.

Zacks’ Top Pick for Potential Doubling

The Zacks research team has identified five stocks with the highest likelihood of gaining 100% or more in the coming months. Among them, Director of Research Sheraz Mian highlights one company with the greatest upside potential.

This leading pick is a lesser-known satellite communications firm. With the space industry expected to reach a trillion-dollar valuation and a rapidly expanding customer base, analysts anticipate a significant revenue surge in 2025. While not all top picks achieve such results, this stock could far exceed previous Zacks selections like Hims & Hers Health, which soared over 200%.

Looking for more recommendations from Zacks Investment Research? Download the 7 Best Stocks for the Next 30 Days today.

• Deluxe Corporation (DLX): Free Stock Analysis Report
• Phibro Animal Health Corporation (PAHC): Free Stock Analysis Report
• Remitly Global, Inc. (RELY): Free Stock Analysis Report
• BrightSpring Health Services, Inc. (BTSG): Free Stock Analysis Report

This article was originally published by Zacks Investment Research.

Zacks Investment Research