When it comes to indices that track the performance of small-cap companies in the U.S., the Russell 2000, a subset of the larger Russell 3000, comes to mind. This index comprises 2000 small-cap companies listed in the United States.
Recent market selloffs affected large market cap stocks significantly. Small market cap stocks slipped their fair share globally as well. However, this market dip presents a unique opportunity.
Furthermore, lower interest rates –which we learn about a month from now in September– would be a massive boon to small-cap companies that need capital to scale up. The inflation report we see on August 14 gives us an idea of what to expect for interest rates next month. But don’t act until it’s too late! Buy these Russell 2000 stocks on the dip now!
GigaCloud Technology (GCT)
GigaCloud Technology (NASDAQ:GCT) is a leading B2B marketplace provider specializing in large goods industries such as furniture. Yahoo! Finance reports three analysts predicting a 1-year price range on GCT between $42.00 and $69.00, with an average price target of $53.96. These estimates indicate a 132.88% 1-year upside.
GCT financials for Q2 2024 were strong, with revenue growing 103.1% YOY and net income growing 46.6% YOY. GCT appears to be an attractive investment with a TTM P/E multiple of 8.1, meaning that the company is significantly undervalued within the B2B technology sector. This is further supported by analyst estimates of the forward price-to-book ratio being below the sector median.
The B2B services industry definitely supports a bull case behind GCT. It is projected to grow to over $1 billion by the end of 2033 at an astounding 13.8% CAGR. One of the primary growth factors behind the industry’s growth is a variety of businesses with established physical locations needing to grow their presence online. Large enterprises are expected to continue leading the charge behind growth, accounting for the industry’s 26.6% CAGR from 2018 to 2022. Strong financials and robust industry growth make GCT one of the Russell 2000 stocks to buy on the dip.
M/I Homes (MHO)
M/I Homes(NYSE:MHO) is a stock that probably isn’t in investor’s portfolios. It’s a residential property development company that mainly builds townhouses. MHO had modest YTD growth at 7.62%. Interestingly, the stock peaked at $167.60 before the selloffs, representing 24.2% growth YTD at the time.
MHO showed robust financials for Q2 2024. Revenue grew 9.4% YOY and net profit margin grew 13.6% for Q2 2024. Additionally, MHO has consistently beat earnings for both EPS and revenue as well. Barring Q4 2023 and Q3 2023, it has beat EPS and revenue estimates for five of the seven past quarters.
A consistently decreasing housing contract backlog is a positive indicator of MHO’s future. Robust growth in financials and improvement in the housing contract backlog are both positive indicators for MHO’s future. The company was an unfortunate victim of mass selloffs. However, that’s exactly why it’s one of the Russell 2000 stocks to buy on the dip.
Innodata (INOD)
Innodata (NASDAQ:INOD) has a relatively small market cap of $476.29 million. The company provides services, products, and solutions that help clients manage information. Yahoo! Finance reports two analysts predicting a 1-year price range on INOD between $30.00 and $38.00, with an average price target of $34.00.
INOD reported strong financials for Q2 2024. While the company didn’t turn a profit, they reported a loss of $14,000. However, net profit margin grew 99% YOY. Revenue has consistently grown for the past five quarters. Additionally, revenue growth has outpaced operating expense growth for the four most recent quarters. Extremely strong, consistent top line growth bodes well for the company’s future.
The company has also established a program with an undisclosed magnificent-seven partner, expected to generate $44 million in annual revenue. While this development may already be priced in, it opens the door for continued partnerships with the magnificent-seven company in question or similar market peers. Strong financials and room for partner growth make INOD one of the Russell 2000 stocks to buy on the dip.
On the date of publication, Matthew Rodrigues did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
