While 2023 was a banner year for large-cap growth stocks, small-cap value stocks lagged behind. The Russell 2000 Value Index, representing small-cap value stocks, managed only an 11.9% gain, compared to a 41.4% surge in the Russell 1000 Growth Index. This discrepancy was driven by concerns over high interest rates and their negative impact on smaller, less diversified companies.
However, as 2023 drew to a close, these concerns began to wane, sparking a rally in small-cap value stocks. This shift saw the Russell 2000 Value Index achieve a historic rebound from a 52-week low to a 52-week high in just 35 trading days. As we enter 2024, small-cap value stocks are poised for a significant resurgence, driven by attractive valuations and untapped growth potential.
Why Investing in Small-Cap Value Stocks Can Be Rewarding
Small-cap value stocks offer unique opportunities, often overlooked by the market. They tend to have market capitalizations under $2 billion, operate in niche markets, and employ higher leverage. Their stocks are less covered by analysts and have lower trading volumes, making them more susceptible to mispricing.
These companies often operate in established industries with predictable cash flows and are perceived as undervalued based on fundamental measures like earnings, book value, and free cash flow. While they carry higher risks due to less diversification and greater debt, they also offer significant upside potential when properly identified.
How to Find Bargains in Small-Cap Value Stocks
To identify undervalued small-cap value stocks, investors should:
Screen for stocks with low price ratios and value characteristics.
Conduct fundamental analysis, including reviewing financial statements, historical performance, and current business trends.
Use valuation techniques, like discounted cash flow analysis, to assess how undervalued a stock is.
The key is to find stocks that are not only undervalued but also have catalysts for growth. Below are seven small-cap value stocks selected for their potential to outperform in the second half of 2024.
7 Best Small-Cap Value Growth Stocks for 2024
1. Everi Holdings (EVRI)
Price: $6.40
52-week Range: $6.30 to $19.85
2024 Earnings (Estimate): $1.05
Industry: Casino/Gaming
Market Cap: $538 million
Everi Holdings provides electronic gaming and financial technology solutions to over 3,100 gaming properties in the U.S. and Canada. Despite a 60% decline in its share price since October 2021, the company has demonstrated strong demand and significant free cash flow generation. With new gaming cabinets expected to boost its installed base and continued growth in its FinTech business, Everi is well-positioned for a recovery in 2024.
2. Olaplex Holdings (OLPX)
Price: $1.52
52-week Range: $1.35 to $7.10
2024 Earnings (Estimate): $0.18
Industry: Household & Personal Care
Market Cap: $1.0 billion
Olaplex, known for its bond-building hair care products, faced significant challenges in 2023 due to misconceptions about product safety and a damaging lawsuit. However, recent results show stabilization, and aggressive marketing efforts are beginning to pay off. With a new CEO and a solid product lineup, Olaplex is set for a turnaround in 2024.
3. American Vanguard (AVD)
Price: $8.94
52-week Range: $8.41 to $22.94
2024 Earnings (Estimate): $0.67
Industry: Agricultural Chemicals
Market Cap: $250 million
American Vanguard produces insecticides, herbicides, and plant nutrition products. Supply issues and conservative inventory management impacted its performance in 2023. However, strong demand and a robust backlog position AVD for a substantial rebound in 2024, with expected sales growth and improved profitability.
4. Hudson Technologies (HDSN)
Price: $9.23
52-week Range: $7.21 to $15.03
2024 Earnings (Estimate): $1.32
Industry: Specialty Chemicals
Market Cap: $420 million
Hudson Technologies is the largest refrigerant reclaimer in the U.S., benefiting from regulations that encourage refrigerant recovery and reuse. Despite a challenging 2023, upcoming regulatory changes are expected to drive demand and profitability in 2024, positioning HDSN for growth.
5. Great Lakes Dredge & Dock (GLDD)
Price: $8.99
52-week Range: $4.75 to $9.67
2024 Earnings (Estimate): $0.62
Industry: Engineering & Construction
Market Cap: $602 million
Great Lakes Dredge & Dock is the largest provider of dredging services in the U.S., crucial for maintaining waterways and ports. Despite recent challenges, the company’s growing backlog and improved project performance signal a strong recovery in 2024.
6. Entravision Communications (EVC)
Price: $2.13
52-week Range: $1.30 to $7.33
2024 Earnings (Estimate): $0.30
Industry: Broadcasting
Market Cap: $191 million
Entravision Communications is transitioning from traditional media to digital advertising solutions. Despite a challenging 2023, the company is poised for growth in 2024 with increased political advertising and strong digital segment performance.
7. Energy Fuels Inc. (UUUU)
Price: $6.79
52-week Range: $4.85 to $9.25
2024 Earnings (Estimate): $0.15
Industry: Uranium & Vanadium Mining
Market Cap: $1.1 billion
Energy Fuels Inc. is a leading U.S.-based producer of uranium and vanadium, both critical elements in clean energy technologies. The company has benefited from increasing demand for nuclear energy and the rising importance of vanadium in battery storage solutions. Despite a volatile 2023, Energy Fuels is well-positioned for growth in 2024 due to its strategic assets, strong production capabilities, and favorable market trends. We issued an exclusive report on Energy Fuels Inc at $5.35/share on April 26th, 2024.
Conclusion
The small-cap value stocks highlighted above offer compelling opportunities for 2024. With the easing of high interest rate concerns and attractive valuations, these stocks are well-positioned for growth. As always, investors should conduct their own research and consider their risk tolerance before investing.
by Steve Macalbry
Senior Editor,
BestGrowthStocks.Com
Disclaimer: This article is intended for informational purposes only. It should not be considered financial or investment advice. We do not hold any form of equity in the securities mentioned in this article. Always consult with a certified financial professional before making any financial decisions. Growth stocks carry a high degree of risk, and you could lose your entire investment.
