3 Cheap Small-Cap Stocks to Buy Before the Next Breakout

If you are bullish over the long term, you should be looking for cheap small-cap stocks to buy now.

With second-quarter earnings season wrapping up, we have a good idea of which companies are winners and losers. And importantly, we also have a sense of what should be driving prices on Wall Street.

Ahead of any further action from the Federal Reserve, start looking for companies that reported strong earnings and have been unfairly treated in 2022. These stocks will rebound when the market turns around.

Cheap Small-Cap Stocks: Peabody Energy (BTU)

In spite of the prevailing theme of greener businesses, we still have a tremendous need for fossil fuels. Coal is one of them, and Peabody Energy (NYSE:BTU) is likely to continue to thrive. It also provides the source of fuel to power generators for charging our electric vehicles. That industry is still budding, so the need for coal power is not likely to abate anytime soon.

There are no obvious signs in BTU’s financials that the business is suffering. Moreover, the company still generated almost $1 billion in cash from operations last year. Lackluster sales are improving, so management can work on reverting to growth in the next two years.

Meanwhile, BTU is showing a positive net income outcome for last year and recent quarter. According to Yahoo Finance, analysts mostly recommend buying shares. 

Upwork (UPWK)

The hawkishness of the Fed has scared businesses into reducing spending. Labor is usually at the front of the line of cuts. As a result, major companies have stopped hiring, and in some cases they started firing. This should negatively impact companies that provide services to the sector. Upwork (NASDAQ:UPWK) is one of those, yet UPWK stock still is a cheap small-cap stock to buy now.

So far, the damage from the hawkish Fed rhetoric has not surfaced in company financials. The growth is still solid and the relative valuation is still there.

Investors here need to have some patience with Upwork. The stock’s price action overall has been difficult to watch. The problems started in October of 2021 and they haven’t stopped yet. But since the May bottom, Upwork has managed to establish a series of higher lows. This is something the bulls can build upon to finally reach a bottom.

Cheap Small-Cap Stocks: WW International (WW)

WW International (NASDAQ:WW) could provide investors with the biggest bang for their buck. Why?

Although WW has been consistently flat in terms of revenue growth, management has delivered positive net income for many years. Additionally, it has delivered about $160 million in cash from operations. For long-term investors, it is all about waiting for a major spike.

In recent weeks, shares have overcome key resistance levels, and shares are now up about 6% over the past month. If bulls can continue to take the lead, more upside awaits them.

On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.