Large-capitalization stocks have performed better than small-cap stocks over the last year. The overall markets are down 3.7% and core small-caps are down 14%, according to Morningstar.com. So, while momentum investors might choose to buy large-cap stocks for a market recovery, other investors might choose to buy overlooked small-caps that haven’t been bid up. But investors could also consider buying micro-cap stocks for overlooked value.
Micro-cap stocks are those with a market capitalizations between $50 million and $300 million. Micro-caps are riskier than the larger-cap companies, mostly stemming from them representing smaller companies. Financing might be more difficult for them than it is for larger companies. And often micro-cap companies have smaller balance sheets, giving them less room for error. There is less time for the companies to become profitable, and even if they are, there might be problems in financing their growth.
Micro-cap stocks also start from a smaller revenue and earnings base and have a better chance of exponentially growing — and having their stock reflect that growth. So let’s talk about some interesting micro-cap stocks to buy now.
| PLAB | Photonics | $22.05 |
| SPTN | Spartan Nash Company | $35.77 |
| NIC | Nicolet Bankshares | $80.64 |
| AOSL | Alpha and Omega Semiconductor | $42.92 |
| MYE | Meyers Industries | $25.10 |
| COLL | Collegium Pharmaceutical | $15.64 |
| FNKO | Funko | $20.74 |
Photronics (PLAB)
Photonics (NASDAQ:PLAB) is selling at its 52-week high in a market that has been going down for months. The company makes and sells photomask products around the world, including in the U.S., Europe and China. Its photomasks are used in manufacturing products such as flat panel displays and integrated circuits.
PLAB is up strong lately because of its second-quarter fiscal year 2022 earnings report on May 25. The company reported a strong quarter, propelling it to “our fifth consecutive quarter of record revenue,” said CEO Frank Lee. He pointed out that its gross margins grew to 36% and operating margins to 25%.
Yahoo.com expects the company to earn $1.90 per share in 2022 and increase per share earnings to $2.22 per share in 2023. This puts its present P/E multiple at 10.2 times 2023 earnings. This is a low multiple and a buy in the micro-cap stocks universe.
Spartan Nash Company (SPTN)
Spartan Nash Company (NASDAQ:SPTN) has announced that it is partnering with DoorDash (NYSE:DASH) to expand DoorDash’s service by using digital and physical applications. Starting May 10, according to BusinessWire, Spartan Nash will offer grocery delivery from over 100 stores; the partnership also allows Spartan’s 2,100 independent retail customers to use DoorDash’s upgraded delivery platform.
Spartan Nash is a food distribution company; it distributes over 65,000 units of goods such as dairy products, meats, bakery goods, and seafood to retailers, food service distributors and e-commerce companies. Under the Our Family brand name, the company distributes private brand items.
First-quarter earnings were reported on Wednesday. Revenue of $2.76 billion was up 4% year over year and just about matched expectations for $2.77 billion. Earnings of 83 cents beat expectations of 64 cents.
Nicolet Bankshares (NIC)
With higher interest rates, banks could have higher earnings, so investors should consider bank stock exposure. Nicolet Bankshares (NYSE:NIC) is one of the micro-cap stocks to look at for growth. The company has 52 branches in Wisconsin and Michigan and offers the full gamut of services for retail and commercial customers, such as checking, savings, commercial loans, business loans and lines of credit.
NIC also offers wealth management, personal brokerage, and other financial services. The bank offers commercial and residential real estate loans.
Yahoo.com shows that a year ago NIC made $5.44 per share; the average analyst estimate for this year is $7.12, and for next year, $8.11.
Barrons.com reports that the analysts reporting to them have an average future price target of $107.40 on NIC, and a buy rating on the stock. Nasdaq.com reports that the average price target of analysts reporting to them is $109.
Alpha and Omega Semiconductor Limited (AOSL)
Alpha and Omega Semiconductor Limited (NASDAQ:AOSL) designs, makes, and sells power semiconductors which have a variety of applications including computers, smartphones, television power supplies, telecommunications equipment, and other end products. Alpha and Omega also supply integrated circuits that deliver and control power used in flat panel displays, networking equipment, and other end products. The company operates all over the world.
AOSL earnings are impressive: Yahoo.com shows last year’s earnings per share of $2.93, and analysts’ estimates of $4.46 for this year, and $5 for next year. That puts the stock at under a 10 times earnings P/E, a very reasonable multiple, and making AOSL one of the top micro-cap stocks to consider, even in this difficult market.
One negative, as reported by Investors Business Daily, is that sales for this quarter were less than anticipated.
Meyers Industries (MYE)
BusinessWire.com on June 1 reported that Meyers Industries (NYSE:MYE) acquired Mohawk Rubber Sales of New England, a leading auto parts dealer, one of the leading tire repair companies in the U.S. It distributes product through online and regular channels. Meyers makes metal and polymer products for consumer and commercial markets. Meyers is the largest tool, equipment, and supply distributor for the “tire, wheel, and under-vehicle service industry in the U.S.”
Meyers is expected to report its second-quarter 2022 earnings on Aug. 1, and TipRanks.com reports that analysts’ consensus earnings per share forecast is 38 cents compared to last year’s 29 cents a share. For the year, Yahoo.com’s average analysts’ forecast is for $1.51 a share, a 55% increase over last year’s earnings per share of 97 cents.
MYE carries a price/earnings ratio of about 19 times according to Yahoo.com, which is a little high, so investors might wait for the stock to decline before buying, or use dollar cost average purchases.
Collegium Pharmaceutical (COLL)
Collegium Pharmaceutical (NASDAQ:COLL) has developed its patented DETERx platform that is used to deter abuse and treat chronic pain and disease. The platform facilitates the safe extended release of abused drugs. Its products include Xtampza ER, which is a safer formulation of oxycodone; and other formulas for the management of pain. These products improve long-term opioid treatment.
Yahoo.com reports that analysts on average expect COLL to earn $5.39 a share for this year; vs. $2.38 a share last year. And for next year, COLL is estimated to earn $7.28. Revenues for this year are expected to be $456.93 million, and for next year revenues are estimated at $568.32 million, which would be almost a 25% increase. Very substantial.
Morningstar shows current price/earnings multiple at 14.8 times, and a forward multiple of 3.2, which is low for those projected earnings. The company is reasonably priced for the expected growth and is one of the top micro-cap stocks to buy.
Funko (FNKO)
According to Investor’s Business Daily on May 31, the IBD SmartSelect rating on Funko (NASDAQ:FNKO) increased from 94 to 96. This means that FNKO beat 96% of the other stocks in the rating pool. Those ratings are based on performance and technical strength.
The article points out that FNKO had 42% earnings growth in its first quarter and revenue growth of 63% YOY. Funko ranked first in the games, hobby, leisure-toys/games group.
The company makes and markets licensed pop culture consumer products in the U.S. and internationally. It makes products like backpacks, T-shirts, keychains, and board games and offers them under names such as Funko, Pop!, Paka Paka, and Vinyl Gold.
Funko has an 18.3 price/earnings multiple, according to Morningstar.com, and a forward multiple of 12.8. This is a reasonable valuation, and the stock can be bought here as one of the micro-cap stocks to hold for appreciation.
On the date of publication, Max Isaacman 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.
