The large-capitalization S&P 500 index is down nearly 13% so far in 2022, while the Russell 2000 small-cap index is down approximately 16%. Recently, small-cap stocks have underperformed the safer large-cap stocks. It is interesting that last week, all major U.S. stock market indexes made a strong rally and closed higher by nearly 6% for the week. The S&P 500 gained 6.58% last week and the Russell 2000 gained 6.46%. Small-cap stocks can rally if there is a shift to risk-on mood, provided that economic conditions get better as inflation could reach a peak and start declining.
In 2022, value seems to be the dominant investment trend. These seven small-cap stocks are attractive because they can be considered inflation bets and contrarian and value plays in a tough investment environment that makes picking stocks too important given the expectations of tighter monetary policy throughout 2022.
Here are seven undervalued small-cap stocks to buy for June:
|CCS||Century Communities, Inc.||$53.95|
|TIGO||Millicom International Cellular S.A.||$17.14|
|RLGY||Realogy Holdings Corp.||$12.11|
|QRTEA||Qurate Retail, Inc.||$3.84|
|ADV||Advantage Solutions Inc.||$4.44|
|MHO||M/I Homes, Inc.||$46.68|
Undervalued Small-Cap Stocks: Century Communities (CCS)
Century Communities (NYSE:CCS) is a designer, developer, constructor, and seller of single-family attached and detached homes. It also engages in the development of underlying land and provides financial services, such as insurance services, to its homebuyers. The firm was founded in 2002 and is headquartered in Colorado.
Shares of Century Communities are down just over 35% in 2022 and now trade at a price-to-earnings (P/E) ratio trailing 12-months (TTM) of 3.32 with a forward dividend and yield of 80 cents and 1.47%, respectively.
The fundamentals look very strong with sales growth of 18.09% in 2019, 24.66% in 2020, and 33.38% in 2021. Net income has followed the strong revenue growth, which is highly bullish. In 2021, net income grew 141.81% to $498.5 million.
CCS stock has a current price-to-sales (P/S) (TTM) of 0.42, a price-to-book (P/B) ratio of 0.94, and a fiscal year (FY) 2022 forward P/S ratio is expected to be 0.39. The return on assets (TTM) of 16.73% is strong and the company has a one-year estimate price target of $82.83, implying 56.9% upside.
Millicom International Cellular (TIGO)
Millicom International Cellular (NASDAQ:TIGO) is a telecom company providing cable and mobile services in Latin America and Africa. Additional services include financial services, such as payments, money transfers, international remittances, savings, real-time loans, and micro-insurance. The firm was founded in 1990 and is headquartered in Luxembourg.
Having lost nearly 38% in 2022, shares of Millicom International Cellular are a bargain for many reasons. They now trade at a P/E Ratio (TTM) of 3.02 and the one-year estimate price target is $20.65, which shows an upside potential of about 20%.
In the first quarter (Q1) of 2022, the company reported continued strength. Millicom Chief Executive Officer (CEO) Mauricio Ramos stated:
“We are off to a strong start in 2022, with operating and financial results ahead of our plans. Our Mobile business performed particularly well. […] B2B also performed strongly, with growth accelerating to about 5%, our fastest growth in more than three years. […] Based on the broad-based nature of our solid performance in Q1, I am confident that 2022 will be an outstanding year for Millicom, now entirely focused on the Latin America region.”
TIGO stock trades at a P/B ratio of 0.65 and has a P/S (TTM) ratio of 0.34. Earnings per share (EPS) are expected to grow from 91 cents in FY2022 to $1.13 in FY2023.
Undervalued Small-Cap Stocks: Cowen (COWN)
Cowen (NASDAQ:COWN) is a financial services company providing investment banking, prime brokerage, securities financing, and investment management services in the United States and internationally. The company was founded in 1918 and is headquartered in New York.
Shares of Cowen are down 26% year-to-date, now trading at a very low P/E ratio (TTM) of 4.87.
Additionally, COWN stock has a forward dividend of 48 cents and a yield of 1.82%. The financial results for Q1 2022 were strong, beating both EPS and revenue estimates. EPS GAAP of $1.05 was a beat by 42 cents and revenue of $331.64 million was a beat by $17.65 million.
The company’s sales growth and income growth are strong, especially during the past two consecutive years. COWN stock is on sale, trading at a P/B ratio of 0.62 and has a P/S (TTM) of 0.42.
The one-year estimate price target of $45.75 implies 71% upside potential.
Realogy Holdings (RLGY)
Realogy Holdings (NYSE:RLGY) provides residential real estate services, operating through several segments: Realogy Franchise Group, Realogy Brokerage Group, Realogy Title Group, and Realogy Leads Group. The company was incorporated in 2006 and is headquartered in New Jersey.
Shares are down 27% year-to-date and the valuation is now very attractive. The P/E Ratio (TTM) of 4.43 is too low.
The one-year target estimate price is $15.33 and Q1 2022 was a strong one, as the firm “[generated] record first quarter Revenue of $1.6 billion, an increase of 6% or $88 million year-over-year.”
While the net income and EPS were positive, they declined year-over-year. The long-term trend for revenue growth is also very strong. In 2020 and in 2021 the firm reported sales growth of 5.98% and 28.32%, respectively.
Realogy Holdings turned profitable in 2021 with net income growth of 195.28% to $343 million. In more positive news, the annual free cash flow generation is positive and consistent.
With a P/B ratio of 0.63 and a current P/S (TTM) ratio of 0.17, RLGY stock is at a large discount now.
Undervalued Small-Cap Stocks: Qurate Retail (QRTEA)
Qurate Retail (NASDAQ:QRTEA) is a firm which engages in the video and online commerce industries in North America, Europe, and Asia. It is also an online retailer offering women’s, children’s, and men’s apparel. The company was founded in 1991 and is headquartered in Colorado.
Shares of Qurate Retail have lost half their value, nearly 53% in 2022. The Q1 2022 results were not good as year-over-year total retail revenue fell 14% to $2.9 billion and the company reported diluted EPS of zero cents.
The focus now is on turnaround as David Rawlinson, president and CEO of Qurate Retail, said “Our first quarter results reflect the continued challenges of operating amidst extreme supply chain disruptions. We don’t believe this quarter’s results reflect the long-term underlying health of our businesses.”
EPS is expected to grow, however, with an estimated EPS of 96 cents for FY2022 and an estimestaed EPS of $1.27 for FY2023.
QRTEA stock trades at a P/B ratio of 0.48 and is cheap, as the current P/S (TTM) ratio is 0.11. A risky bet for the rebound, but the depressed stock price could deliver a strong return if it rebounds. Additionally, free cash flow trend is volatile, but positive.
The one-year target estimate price for QRTEA stock is $5, implying a 35% increase from the current price.
Advantage Solutions (ADV)
Advantage Solutions (NASDAQ:ADV) provides outsourced solutions to consumer goods companies and retailers in North America and internationally. It operates in two segments: Sales and Marketing. The company was founded in 1987 and is headquartered in California.
Shares of Advantage Solutions have declined nearly 46% in 2022.
Q1 2022 earnings were good, with a year-over-year increase of 15.6% for revenues coming in at $914.8 million versus $791 million in Q1 2021. The company has turned profitable in 2021, reporting a net income of $17.5 million an increase of $18.1 million from the Q1 2021 net loss of $0.5 million. This is a very important improvement in profitability.
The company affirmed its full-year 2022 outlook and the adjusted EBITDA guidance range of $490 million to $510 million, despite important risks like inflation, supply chain constraints, and labor challenges.
The stock trades at a P/B ratio of 0.55 and a P/S (TTM) of 0.38.
The one-year estimate price target is $6.50, which implies upside potential of 49%.
Undervalued Small-Cap Stocks: M/I Homes (MHO)
M/I Homes (NYSE:MHO) is a builder of single-family homes in several states, including Ohio, Indiana, Illinois, Minnesota, Michigan, Florida, Texas, North Carolina, and Tennessee. The firm was founded in 1976 and is based in Ohio.
Shares trade at a P/E Ratio (TTM) of 3.39 and the upside potential of the stock is nearly 83% as the 1-year target estimate is $85.50.
2022 Q1 results were strong. Revenue increased 4% to $860.8 million and net income increased 8% to $91.8 million, making a Q1 record.
The average sales price increased 16% and backlog units increased 1% to 5,526, which is an all-time quarterly record, as well. Sales growth has been very strong for the past two consecutive years, as in 2020 and in 2021 the reported figures were 21.88% and 22.89%, respectively. Additionally, net income growth has been exceptional for the past four consecutive years. With a P/B ratio of 0.76 and a current P/S (TTM) of 0.36, MHO stock is now very cheap.
On the date of publication, Stavros Georgiadis, CFA 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.