The Best Small-Cap Stocks to Buy Today

Small-cap stocks are having a moment—a pretty big moment. The Morningstar US Small Cap Market Index outperformed the broad Morningstar US Market Index by more than 3 full percentage points in 2026’s first half and outlegged the Morningstar US Large Cap Market Index by more than 5 full percentage points.

As a result of these stellar returns, small-cap stocks, as a group, don’t look nearly as undervalued as they did earlier this year. Yet there are still bargains to be found.

The 6 Best Small-Cap Stocks to Buy Today

To create our list of the best small-cap stocks to invest in today, we screened for smaller companies with economic moats whose stocks had outperformed the broad market during the first half of 2026 that were still trading in 4- and 5-star range, suggesting that they’re undervalued. These small-cap stocks made the cut:

1. CarMax KMX
2. CNH Industrial CNH
3. Scotts Miracle-Gro SMG
4. Choice Hotels International CHH
5. Wyndham Hotels & Resorts WH
6. Baxter International BAX

Here’s a little bit from Morningstar’s analysts about each of these small-cap stocks to buy.

CarMax KMX

• Morningstar Rating: 5 stars
• Economic Moat: Narrow
• Year-to-Date Return (through June 30): 36.88%
• Sector: Consumer Cyclical

CarMax is the top-performing name for the year to date on our list of best small-cap stocks to buy. As the used-vehicle expert, CarMax has carved out a narrow economic moat thanks to intangible assets and a cost advantage. CarMax stock trades 45% below our $96 fair value estimate.

Here’s what Morningstar senior analyst Dave Whiston had to say after CarMax reported earnings in mid-June.

CarMax’s fiscal 2027 first-quarter results reported diluted EPS of $1.31, beating the $0.95 LSEG consensus, but the stock fell over 9% during trading on June 17. New CEO Keith Barr announced four strategic pillars, which will be detailed at an investor event in late fall.

Why it matters: The market is eagerly awaiting details of the new strategy, which we think caused the stock’s June 17 decline despite the EPS beat. The pillars focus on offering a broad selection with an easier online experience that complements the in-store experience, all while reducing overhead.

• CarMax is already making changes, such as incorporating more local and competitive data in its pricing algorithm, as well as focusing on individual vehicle types. We like that, after fiscal 2027, the goal is to self-fund lower prices through more efficient operations rather than by lowering gross profit per unit.
• Management said lowering reconditioning costs via more technology is the biggest opportunity, with some improvements already in place. GPU fell $230 year over year, better than the guidance given last quarter of about $300. Turnaround efforts meant no first-quarter share buybacks.

The bottom line: We are lowering our fair value estimate for narrow-moat CarMax to $96 from $99. The change is from raising our weighted average cost of capital by 50 basis points to 9.5% and is a more granular expression of our existing risk assessment rather than a more negative view of the firm.

• We like that Barr is focused on costs and how to optimize customer experience, as these two variables will help sales and profits and ultimately lift the stock well above current levels. Despite the stock up nearly 30% in 2026, we foresee more upside.
• This upside cannot be realized without lower costs and better customer conversion. We are glad to hear Barr recognize that the omnichannel approach needs to be improved so customers can make their store visit experience easier after starting the buying process online.

Read Morningstar’s full report on CarMax.

CNH Industrial CNH

• Morningstar Rating: 5 stars
• Economic Moat: Narrow
• Year-to-Date Return (through June 30): 22.89%
• Sector: Industrials

CNH Industrial is one of three 5-star rated stocks on our list of attractive small caps to buy; the stock is trading 45% below our $20.50 fair value estimate. “Our $20.50 per share fair value estimate equates to 43 times our depressed 2026 EPS estimate,” says Morningstar analyst George Maglares. He notes that management’s guidance for 2026 likely represents a cyclical trough and that our valuation is far less demanding based on CNH’s (prior peak) 2023 results, with implied price/earnings of 12 times and enterprise value/EBITDA of 10 times.

Here’s Maglares’ outlook for the company.

CNH Industrial has a somewhat complicated history dating back to 2013 when the legacy Case New Holland business was combined with the nonautomotive activities of Italy’s Fiat Group to form CNH Industrial. After the pandemic, CNH’s management decided to further separate the company’s off-road and on-road assets. This resulted in the 2022 demerger of Iveco Group, which represented the remaining “on-road” commercial vehicle and powertrain assets. Remaining CNH Industrial is now focused on its agriculture business (most of its industrial sales), construction, and the captive finance subsidiary. Management is also exploring construction options, which are subscale and weigh on group returns.

The agricultural business is the number-two global player and is organized very similarly to the top global competitor, Deere. Both firms have long histories and have cultivated iconic brands for industrialized agriculture around the world. This has resulted in a large, loyal installed base of products and customers. Both firms maintain independent dealer networks with thousands of points of sale and global reach. They also operate captive finance subsidiaries to bundle financing, enhancing their value proposition. The next strategic chapter for CNH is the advent of “precision agriculture,” meaning the incorporation of various digital technologies into agricultural equipment to enhance crop yields and drive other efficiencies. The company refers to this as its “iron and tech” strategy. Incorporating these advanced technologies into its products and working closely with its customer network ideally set CNH up in a virtuous circle of margin-accretive innovation in a growing global market.

As a result, we would characterize CNH’s business strategy as “fast follower.” Its lower market share and weaker balance sheet have resulted in returns inferior to Deere’s. Moreover, this has forced CNH to acquire various capabilities as opposed to organic development. However, we believe CNH offers a comparable portfolio of products, a dealer network, and a finance subsidiary, all at scale. While it lags Deere, the rising tide of precision agriculture will inevitably lift all ships.

Read Morningstar’s full report on CNH Industrial.

Scotts Miracle-Gro SMG

• Morningstar Rating: 4 stars
• Economic Moat: Narrow
• Year-to-Date Return (through June 30): 18.99%
• Sector: Basic Materials

Scotts Miracle-Gro looks like an attractive small-cap stock to buy as shares trade 15% below our $80 fair value estimate. The largest name in the US consumer lawn and garden market has carved out a narrow economic moat as its strong brands generate pricing power.

Here’s Morningstar senior analyst Seth Goldstein’s latest commentary on Scotts’ fair value estimate and profit drivers.

In the US consumer segment, we forecast sales will return to small growth in fiscal 2026 on higher volume. While we see small growth in fiscal 2027 as well, we see lower margins as a result of fertilizer and energy cost inflation. Scotts should be able to pass along most of the price increases but will likely see lower volume as a result. In the longer term, we expect the segment to benefit from normalized volume and improving margins as input costs fall and prices remain somewhat stable.

Our forecast for US housing starts to average 1.4 million-1.5 million per year over the next decade drives our long-term outlook. This should increase demand for Scotts’ products over the next several years. We assume Scotts will be able to raise prices in line with inflation. We forecast roughly 3%-4% average annual revenue growth through fiscal 2033 as Scotts expands into e-commerce, signs partnerships to sell new products, and targets more professional lawn and gardening customers. This is in line with management’s growth initiatives. We assume segment profit margins expand to the low 20s but remain below prepandemic levels in the mid-20s. While management aims to make some acquisitions of new gardening products, we do not model any deals until announced.

In a downside scenario, we assume little sales growth and lower margin recovery versus our base case. Our fair value estimate would fall to $50 per share.

Read Morningstar’s full report on Scotts Miracle-Gro.

Choice Hotels International CHH

• Morningstar Rating: 4 stars
• Economic Moat: Narrow
• Year-to-Date Return (through June 30): 16.36%
• Sector: Consumer Cyclical

Choice Hotels International is one of two lodging names on our list of the best small-cap stocks. The company is currently looking for a new CEO after Patrick Pacious stepped down in late May. We think the stock is worth $127, and it trades 13% below that.

Here’s Morningstar senior analyst Dan Wasiolek‘s current outlook for the company.

With about 90% of Choice Hotels’ US portfolio within one mile of an interstate, the company is positioned to benefit from US artificial intelligence, onshoring, and infrastructure activity. Also, 2026 demand should be helped by easier comparisons (2025’s government shutdown and the April 2 tariffs) and the tailwinds of this year’s FIFA World Cup and US economic stimulus. Long term, we expect Choice to gradually expand room share in the hotel industry in the next decade, with its keys increasing more than 2% on average annually, above the 1%-2% supply lift we estimate for the US industry over that time. Room growth points to higher-quality units, as Choice’s pipeline is expected to generate revenue that is, on average, 70% above its existing base, and the company removed rooms in 2025 that produced 20% less revenue than the consolidated average. The expansion of its higher-scale and extended-stay portfolio stands to buoy the company’s brand intangible asset and switching cost advantages. Specifically, growth is supported by a rejuvenated Comfort brand (27% of 2025 total global rooms), the newer Everhome concept and extended-stay brand WoodSpring (6% combined), the acquisition of the higher-scale Radisson brand in 2022, new Canada and China franchise relationships in 2025, and a solid loyalty program with 74 million members as of Dec. 31, 2025, up from 44 million in 2019. Choice holds a 1.6% global hotel revenue share, ranking it eighth in the industry, and 5.6% US hotel revenue share, ranking it fourth in the industry.

With essentially all rooms franchised, Choice has an attractive recurring-fee business model with high returns on invested capital (estimated to average 18% over the next five years, including goodwill), as franchised hotels have low fixed costs and capital requirements. This asset-light model creates switching costs, given 20-year to 30-year contracts that have meaningful cancellation costs for owners.

Read Morningstar’s full report on Choice Hotels International.

Wyndham Hotels & Resorts WH

• Morningstar Rating: 4 stars
• Economic Moat: Narrow
• Year-to-Date Return (through June 30): 12.59%
• Sector: Consumer Cyclical

The second lodging name on our list of top small-cap stocks to invest in, Wyndham Hotels & Resorts is trading 12% below our $96 fair value estimate. “Wyndham’s AI investments are driving call center and marketing cost efficiencies and improving the user experience, helping drive stronger unit economics for owners and customer demand,” notes Morningstar’s Wasiolek. “The firm has integrated AI in its app that is connected to external AI models, driving ancillary sales (up 21%).”

Here’s Wasiolek’s outlook on the company.

Despite higher gas prices due to the Iran war, Wyndham’s US demand is stable, helped by easier comparisons (2025’s government shutdown and the April 2 tariffs), the tailwinds of this year’s World Cup and US economic stimulus, and the start of a multiyear artificial intelligence, onshoring, and infrastructure spending cycle. Additionally, we expect Wyndham Hotels & Resorts to gradually expand room share in the hotel industry and maintain a brand intangible asset and switching cost advantage. This view is supported by the company’s 50% share of all US economy and midscale branded hotels (where Wyndham has a handful of the top 10 brands based on guest satisfaction, according to J.D. Power) and the industry’s fourth-largest loyalty program by membership (122 million as of Dec. 31, 2025), which encourages third-party hotel owners to join the platform. Also, Wyndham has around 5% and 2% share of existing US and global hotel rooms, respectively, with a pipeline that represents more than 30% of its current unit base. As a result, we see room growth averaging 3% during the next 10 years (2026-35), above the 1%-2% lift we model for the US hotel industry and forecast 2% annual revenue per available room growth during this time, aided by incremental demand from increased US infrastructure (20% of 2025 gross room revenue from infrastructure workers) buildout during the next several years.

With 100% of its 8,300 hotels franchised, Wyndham has an attractive recurring-fee business model with healthy returns on invested capital, as these asset-light relationships have low fixed costs and capital requirements. This asset-light model creates switching costs, given 10- to 20-year contracts that have meaningful cancellation costs for owners.

We see the 2018 acquisition of La Quinta as a strategically strong fit that supports Wyndham’s intangible-asset-driven narrow moat while enhancing long-term growth. In fact, we think La Quinta can approach 2,000 hotels long-term from 893 at the end of 2025.

Cyclicality and overbuilding are the main risks for shareholders. Typically, US lodging recoveries last five to nine years, but the recent upcycle that ended in early 2020 lasted 10 years.

Read Morningstar’s full report on Wyndham Hotels & Resorts.

Baxter International BAX

• Morningstar Rating: 5 stars
• Economic Moat: Narrow
• Year-to-Date Return (through June 30): 11.67%
• Sector: Healthcare

Baxter International rounds out our list of the best small-cap stocks to buy today; It’s also the only name from the healthcare sector. “With medical utilization rising, supply chain pressures easing, and new contracts with group purchasing organizations coming online, Baxter’s profits remain in turnaround mode,” says Morningstar senior analyst Julie Utterback.

Here’s how Utterback arrives at her $40 fair value estimate on the stock.

We are keeping our fair value estimate for Baxter at $40 per share, but investors should note that our projections depend on a long-term turnaround of the business, especially on the margin front.

Overall, after another tough year in 2025, we anticipate that Baxter’s revenue could grow 3% compounded annually through 2030. That top-line expectation recognizes the challenges that Baxter faces through 2027, including the voluntary shipment hold on its Novum infusion pump platform. Also, the company could face headwinds in its large capital equipment business if hospital finances are challenged by a rising uninsured rate in the US, as the federal government reduces spending on the individual exchanges (starting in 2026) and Medicaid (starting in 2027).

We also expect adjusted EPS to grow 9% compounded annually through 2030, primarily on margin expansion under the new CEO, who aims to instill a continuous improvement culture into Baxter’s operations. We also assume that free cash flows can reach levels roughly equivalent to adjusted net income, as the firm controls its working capital better in the future. Additionally, share repurchases account for about 100 basis points of our adjusted EPS growth expectation through 2030, although they may remain muted in the near term.

Read Morningstar’s full report on Baxter International.

Are Small-Cap Stocks a Good Investment Now?

At the end of June, small-cap stocks looked slightly undervalued according to Morningstar’s measures. That said, small-cap stocks can be notoriously volatile and may remain so given concerns about the Federal Reserve raising interest rates this year.

We encourage long-term investors who want to invest in small-cap stocks today to favor undervalued stocks of small companies with economic moats. Generally, such companies have built structural barriers that protect them from competition—and those that are undervalued should hold up better on the downside.

How to Screen for More Undervalued Small-Cap Stocks to Invest In

Investors can use our Morningstar Investor Screener tool to find stocks of smaller companies that are trading at attractive valuations. To build your screen, include the following filters:

Filter on all small-cap stocks. Beneath Security Type, select Stocks. Then click the blue + Filter button and choose Basics, then Stock Style Box. Back in the left-hand navigation, choose Small Value, Small Core, and Small Growth for a full list of small-cap stocks.

Filter on those with economic moats. If quality matters to you, you can filter on those small-cap stocks with economic moats by clicking + Filter and then Ratings & Analysis -> Economic Moat. Back in the left-hand navigation, choose Wide and Narrow. To refine the list to only those companies Morningstar’s analysts cover, slide the button to the left to exclude quantitatively rated stocks.

Add a valuation filter. You can then further refine the list by focusing on small-cap stocks with economic moats that are undervalued by filtering on those that have 4 and 5 star ratings. Or you can look at valuation through other lenses, including price/earnings. Simply use the + Filter button to add the small-cap stock valuation filter that best fits your criteria.