The 7 Best Micro-Cap Stocks to Buy

  • These are some of the best micro-cap stocks right now – companies that can compensate for their riskiness with attractive long-term returns.
  • TransGlobe Energy Corporation (TGA): An oil exploration company that intends to allocate a minimum of 75% of its free cash flow to shareholders.
  • Euroseas (ESEA): A shipping company with a P/E ratio of 2.55 and an upside potential of 120%.
  • RCM Technologies (RCMT): The stock has more than doubled in 2022 but more gains could be on the horizon, as its P/E still looks more than reasonable.
  • EuroDry (EDRY): Another shipping company that is both a value and growth play now. Its EBITDA has seen triple-digit growth, which is expected to continue
  • Landsea Homes Corporation (LSEA): A homebuilder that returned to profitability in 2021 trading, and reported a very strong Q1 2022.
  • BGSF (BGSF): A company that is not only cheap but pays consistent dividends too, with a yield just under 5%.
  • Build-A-Bear Workshop (BBW): A retailer with strong fundamentals that could increase over 120% if analyst price targets are right.
best micro-cap stocks - The 7 Best Micro-Cap Stocks to Buy

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Is now the time to invest in micro-capitalization stocks? It can be for the right investor. Investing in stocks is a constant game of balancing return, valuation, market conditions and risk management. And while these often-volatile stocks can really bring the risk, the best micro-cap stocks can also bring big returns.

A micro-cap stock is a publicly traded company that has a market capitalization between $50 million and $300 million. Compared to large-cap or mid-cap stocks the micro-cap stocks are much more likely to go boom or bust.

And finding stocks to buy in the second half of 2022 is a challenging task, as the first half proved to be a very tough period. All major stock indices posted double-digit losses. But that can sometimes create opportunities.

The following are seven of the best micro-cap stocks to buy. They are risky, but they have a confluence of positive events — whether momentum, growth, or valuation — that makes them interesting plays for a rebound in the second half of 2022.

So let’s look at the best micro-cap stocks to keep your eye on right now.

TGA TransGlobe Energy Corporation $3.41
ESEA Euroseas $23.19
RCMT RCM Technologies $20.62
EDRY EuroDry $16.53
LSEA Landsea Homes Corporation $6.92
BGSF BGSF $12.03
BBW Build-A-Bear Workshop $15.34

TransGlobe Energy Corporation ()

oil stocks: stacks of oil barrels

Source: Shutterstock

TransGlobe Energy Corporation (NASDAQ:TGA) is an independent oil exploration and production company with business in Egypt and Canada. The stock is up nearly 14% in 2022, which is not that much given how far oil prices have rallied. This could mean further gains could be on the horizon as the company decided to “allocate a minimum of 75% of its annual free cash flow to shareholders through dividends and share buybacks.”

The first-quarter 2022 financial results were strong, showing net earnings of $48.8 million compared to a loss of $11 million the same quarter a year ago. Petroleum and natural gas sales increased to $81.5 million a 93% year-over-year change.

The shares of TransGlobe Energy Corporation trade at a trailing price-earnings ratio of 2.73 offering an attractive forward dividend yield of 6.1%.

The forward price/sales ratio of 0.7X makes the stock cheap and the firm announced its business operations are in-line with its plan in Egypt and in Canada.

Euroseas ()

Tugboat assistance. Container ship EM ATHENS of Euroseas (<a class=ESEA) container operator from Greece is entering the harbour with assistance of port tugboat RIL” width=”300″ height=”199″ />

Source: VolodymyrT / Shutterstock.com

Euroseas (NASDAQ:ESEA) is a shipping company operating in the container shipping market. The company has a fleet of 18 vessels — 10 Feeders, and eight Intermediate containerships.

The first-quarter 2022 financial results reflected a strong financial performance with a year-over-year revenue increase of 217% to $45.37 million versus $14.31 million in Q1 2021. Net income increased to $29.94 million compared to $3.79 million a year ago and the dividend per share increased to 50 cents after not paying one for years.

This strong financial performance is bullish during a time when headwinds like the war in Ukraine, soaring energy prices and Chinese lockdowns are all harming the global economy.

The shares of Euroseas trade at a very low trailing P/E ratio of 2.55, and if the dividend becomes regular that would be another reason to buy. The one-year target estimate of $51 implies the stock could more than double.

The net income margin of 55.31% and return on total assets of 28.59%  are very strong and can support a significant rebound in the stock price.

RCM Technologies ()

two businesspeople sit at a table stacking up coins in the shape of an ascending bar chart

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RCM Technologies (NASDAQ:RCMT) provides business and technology solutions to “enhance and maximize the operational performance of its clientele,” having operating segments consisting of  Engineering, Information Technology and Specialty Health Care Services.

The stock has rallied 170% in 2022 but more upside is likely, as the one-year target is $24.50, signaling a potential rise of 23%.

The shares of RCM Technologies are now trading at a trailing P/E ratio of 13.38, which is still low given the enormous stock price rally year to -to-date.

In Q1 2022 the firm had a beat on both EPS and on revenue. The EPS GAAP of 62 cents came in 35 cents ahead of estimates, and revenue of $81.96 million was a beat by over $16 million.

The firm has a nice track record, beating EPS estimates in the past four consecutive quarters. The expected revenue growth of 29.49% seems strong and the forward EBITDA growth of 192.15% is very bullish.

EuroDry ()

Plenty of shipping containers stacked at the Port of Hamburg and blue sky

Source: Hieronymus Ukkel / Shutterstock.com

EuroDry (NASDAQ:EDRY) is a shipping company operating an 11-ship fleet of dry bulk carriers. It can be considered both a value and a growth stock, as its YOY revenue growth was 187.42% and forward revenue growth is expected to be 58.5%. The  expected EBITDA growth of 137.44% is very high after year over year EBITDA growth of 563.81%.

Having a forward P/B ratio of 0.37 and a forward price/sales ratio of 0.52, EDRY stock is very cheap.

The profitability measures look great too, as the net income margin is 55%, and the operating margin is 62.1%.

Another positive factor that is bullish for EDY stock is the sales growth. Revenue soared 189.12% in 2021 and net income increased 630.02% to $31.15 million.

The shipping companies are exposed to economic and business cycles, but the timing as of 2021 seems to be strong and further capital gains are likely, as the one-year target is $45.43, a potential gain of over 170%.

Landsea Homes Corporation ()

A photo of a man in a mask and neon green vest in front of a home that's under construction.

Source: Tong_stocker/ShutterStock.com

Landsea Homes Corporation (NASDAQ:LSEA) is a homebuilder working in areas like New York, Boston, New Jersey, Arizona, Florida and Texas. Its stock seems to be resilient, with moderate losses of 4.9% in 2022.

The firm has reported a very strong Q1 2022, with EPS of 28 cents beating expectations by 11 cents and revenue of $316.23 million beating by $74.91 million, but the good report failed to generate yet any stock price rally.

The homebuilder has beat EPS estimates in the past three out of four quarters which is a strong trend. And this, the shares of Landsea Homes Corporation seem very attractive now as they have a forward P/S ratio of 0.21 and a trailing price/book of 0.51.

The sales growth is strong with an increase of 39.30% in 2021 and it is very bullish that the firm returned to profitability in 2021 with net income growth of 676.75% to 51.63 million.

BGSF ()

remote working. woman working on a laptop outside watching sunrise.

Source: Olesya Kuznetsova / Shutterstock

BGSF (NYSE:BGSF) is a company that provides job opportunities in several industries, ranging from IT, Project Management and Accounting, to Cybersecurity, Property Management and Commercial.

The stock is down nearly 15% in 2022 but this could change soon, as in 2021 the sales growth was 15.4% rebounding from a decline of 29.62% in 2020 and net income in 2021 increased 604.75% to $10.46 million.

The firm has relatively low capital expenditures due to the nature of its business and therefore generates positive and consistent free cash flows, as the net operating cash flows are strong.

This firm has an excellent track record of beating EPS estimates in the past four consecutive quarters.

The forward dividend yield of 4.9% is attractive and, notably, the firm has paid dividends for 30 consecutive quarters.

The one-year target of $19.25 is a potential gain of 58%.

Build-A-Bear Workshop ()

A Build-A-Bear (<a class=BBW) storefront in Philadelphia, Pennsylvania.” width=”300″ height=”169″ />

Source: Helen89 / Shutterstock.com

Build-A-Bear Workshop (NYSE:BBW) sells stuffed animals, clothing and accessories. This retailer has lost around 24% of its value in 2022 and now seems to be very cheap. Buying a cheap stock without solid catalysts to move higher is a risky investment decision. The firm, after a YOY revenue growth of 45.65% is expected to have revenue growth of 23.35%.

Investors should be happy as the diluted EPS growth is 454.46% and at the same time, the ROE Growth (YoY) of 392.63% is phenomenal. On another note, it is great to see the firm has increased its net income growth much higher than its sales growth in FY 2022 as net income surged 305.65% to $47.27 million.

The forward P/S ratio of 0.49 is low and indicative of a cheap stock. The free cash flow generation is also robust and bullish for the stock price. The one-year target of $33 if materialized would signal an upside of over 120%.

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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.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.


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