The rapid surge in COVID-19 cases across the United States, with the virus’ Delta variant mercilessly tightening its grip, is causing high volatility in the stock market. Although  major U.S. benchmark indexes are hovering near their all-time highs, the Dow Jones Industrial Average and S&P 500 pulled back yesterday.

In addition to the resurgence of COVID-19 cases, inflation concerns are spooking investors. Amid this stock market volatility, the odds of overpriced large-cap stocks witnessing corrections are high. However, lesser-known small-cap stocks that have greater growth potential and gained significant momentum could continue gaining.

Under-the-radar stocks Alliance Resource Partners, L.P. (ARLP), Caleres, Inc. (CAL), and Big 5 Sporting Goods Corporation (BGFV) have generated significant momentum over the past few months. And we think that they are uniquely positioned to keep rallying through the remainder of the year. So, it could be wise to bet on these stocks now.

Alliance Resource Partners, L.P. (ARLP)

ARLP in Tulsa, Okla., is a diversified natural resource company that produces and markets coal to major U.S. utilities and industrial users. The company operates through Illinois Basin; Appalachia; and Minerals segments. It had approximately 1.7 billion tons of coal reserves in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia, as of December 2020.

ARLP’s total revenues increased 42% year-over-year to $362.4 million in the second quarter, ended June 30, 2021, driven by increased coal sales volumes and rising oil & gas prices. The company’s operating income amounted to $55.01 million, compared to a $35.10 million operating loss in the second quarter of 2020. Its adjusted EBITDA rose 145.9% year-over-year to $118.60 million. ARLP reported $44.04 million in net income for this quarter, compared to a $46.66 million net loss in the prior-year period. Furthermore,  its adjusted EBITDA for its Coal Royalties segment increased 80.5% year-over-year to $6.8 million.

A $0.78 consensus EPS estimate for its fiscal year 2021 represents a 176.5% improvement year-over-year. ARLP has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Meanwhile, the $1.43 billion consensus revenue estimate for the current year indicates a 7.4% increase year-over-year. The stock has gained 136.5% over the past year to close its last trading session at $7.94. It has  returned 69.4% year-to-date.

ARLP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock also has an A grade for Sentiment, and a B for Momentum and Value. In addition, we have also graded ARLP for Quality, Stability, and Growth. Click here to access all of ARLP’s ratings.

ARLP is ranked #2 of 11 stocks in the A-rated MLPs – Other industry.

Caleres, Inc. (CAL)

CAL is a wholesale and retail footwear operator in the United States, Canada, Guam, and China. The company, which is based in St. Louis, Mo., operates through Famous Footwear and Brand Portfolio segments. In addition,  CAL designs, sources, and sells footwear to online retailers, mass merchandisers, and national chains.

In April, the company published its first ESG report in which it expounded on its  ambitious goals for the next five years. CAL plans to use environmentally preferred materials in 100% of its shoes and other products and reduce energy consumption by 25% in its distribution centers and retail stores.

In its first fiscal quarter, ended May 1, 2021, CAL’s net sales increased 60.8% year-over-year to $638.6 million. The company’s sales under its Famous Footwear segment rose 108.2%, while its e-commerce website sales rose 21.4%. Its adjusted net income came in at $22.8 million, versus a $50.4 million adjusted net loss in the prior-year quarter. The company reported a $274.9 million gross profit, which was up 125.5% from its  year-ago value. Its cash and cash equivalents totaled $98.24 million at the end of the first quarter.

Analysts expect CAL’s revenue for its fiscal year 2022 to be $2.72 billion, representing 28.5% year-over-year growth. CAL has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is likely to increase 37.5% for the next quarter, ending October 2021. Also, CAL’s stock price has surged 248.9% over the past year and 45.3% over the past six months.

CAL’s POWR Ratings reflect this promising outlook. The stock has an overall A rating which translates to Strong Buy in our POWR Ratings system. It has an A grade for Momentum, and a B for Growth and Value. In addition to the POWR Ratings grades we’ve just highlighted, one can see CAL’s ratings for Stability, Sentiment, and Quality here.

Of the 64 stocks in the A-rated Fashion & Luxury industry, CAL is ranked #10.

Big 5 Sporting Goods Corporation (BGFV)

BGFV is a sporting goods retailer that operates in the Western United States. The company sells private label items, including shoes, apparel, camping equipment, fishing supplies, and private label merchandise under Harsh, Pacifica, Golden Bear, and Rugged Exposure trademarks. BGFV operated 430 stores in 11 states as of July 2021. It is based in El Segundo, Calif.

The company’s net sales increased 43% year-over-year to $326.02 million in the second quarter, ended July 4, 2021, while its same-store sales rose 31.2%. Its gross profit grew 75.8% from its  year-ago value to $126.92 million, while its operating income expanded 196.7% year-over-year to $48.54 million. Furthermore,  BGFV’s gross margin came in at 38.9% for this quarter versus 31.7% in the second quarter of the prior year. The company reported $36.80 million in net income , representing a year-over-year increase of 230.5%.   

BGFV’s EPS is expected to increase 3,500% in the current quarter, ended June 2021, and 37.4% in 2021. A $1.13 billion  consensus revenue estimate for the current year represents an 8.1% improvement  from the same period last year. Over the past year, the stock has returned 193.7%. In addition, the stock has returned 124.7% so far this year.

It’s no surprise that BGFV has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Momentum, Value, and Quality. Click here to see the additional POWR Ratings for BGFV (Stability, Growth, and Sentiment)

In the A-rated Athletics & Recreation group, BGFV is ranked #2 of 35 stocks.

ARLP shares rose $0.06 (+0.76%) in premarket trading Wednesday. Year-to-date, ARLP has gained 84.04%, versus a 19.38% rise in the benchmark S&P 500 index during the same period.

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.

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