There again appears to be a sizable gap between the way small caps are performing versus their larger cap peers. The Russell 2000, an index tracking the performance of small- to mid-cap companies, has not had a good first quarter in 2024. So far, the Russell is trading up 4.81% year-to-date, while the S&P500 and Nasdaq Composite have appreciated 10.16% and 9.11% respectively, since the first quarter of trading ended on Friday. However, with many small-cap stocks not having rallied like their many large-cap stocks have, now may be the time for investors to seek the most undervalued small-cap stocks to buy in April.
Here are the three most undervalued small-cap stocks to buy in April.
Titan Machinery (TITN)
Titan Machinery (NASDAQ:TITN) is a dealer of agricultural and construction equipment, such as tractors, combines, excavators and loaders. Agriculture and agricultural equipment may not be the most exciting sector to be holding, but this particular stock has generated compelling growth over the past couple of years.
Despite elevated fuel prices in 2022, Titan’s revenue grew by 29.1% YOY, and the company did not compromise on margins for growth. In particular, gross margins and EBITDA margins both expanded slightly on a year-over-year basis. Similarly, Titan delivered another year of solid double-digit growth in 2023, increasing revenue by nearly 25% to $2.75 billion from $2.21 billion in 2022.
The equipment dealer has a market cap of $593.9 million and trades at 7.6x forward earnings. Despite several quarters of strong growth, TITN has underperformed the market over the past 12 months. The stock is down more than 20%. Since the beginning of 2024, there has been talk about U.S. equities being largely expensive. Trading multiples are becoming stretched, and holding a company with stable growth and a low multiple could be a way to avoid a devaluation disaster.
ACM Research (ACMR)
ACM Research (NASDAQ:ACMR) is a semiconductor equipment manufacturer. In particular, ACM Research supplies semiconductor manufacturers with wet processing equipment and technologies, and the manufacturer has a particular focus on China’s domestic semiconductor market.
ACM Research’s earnings results throughout 2023 were admittedly impressive and beat Wall Street’s estimates. Its recent earnings report was no different. Full-year revenue climbed 43% year-over-year to $558 million. ACM Research expects solid double-digit revenue growth in 2024 as well. During this period, the company expects its Shanghai-based unit to grow substantially.
Furthermore, while ACMR has appreciated nearly 50% year-to-date, the company’s share price is trading at relatively cheap valuation multiples. ACMR’s forward EV/EBITDA is around 13.4x, and its forward price-to-earnings ratio is 20.0x. ACM Research is cheap when compared to other semiconductor stocks out there, and the company’s growth prospects could help it rally even further.
Digi International (DGII)
Digi International (NASDAQ:DGII) provides business and mission-critical Internet of Things (“IoT”) connectivity products, services and solutions. Enterprises operating in government services, manufacturing services, healthcare and supply chain as well as logistics sectors can deploy Digi’s range of IoT products to monitor critical communications infrastructures.
Digi International so far has two reporting segments: IoT Products & Services and IoT Solutions. The former represented 77.7% of revenue at the end of its fiscal year 2023 and helps government customers and “original equipment manufacturers” (OEMs) deploy IoT connectivity solutions, including embedded and wireless modules, console servers, enterprise and industrial routers. The latter represented 22.3% of total revenue in fiscal year 2023 and includes a variety of solutions and services, such as wireless temperature and other condition-based monitoring services.
During the first quarter of fiscal year 2024, Digi worked to increase annual recurring revenue (ARR) to $108 million, and as the company continues to build up its customer base, its shares could make a compelling investment. DGII has risen nearly 23% on a year-to-date basis, yet the stock is trading at 15.0x forward earnings.
On the date of publication, Tyrik Torres 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.
