7 Undervalued Small-Cap Stocks to Buy Now

  •  These undervalued small-cap stocks to buy have been beaten down more than they deserve and could outperform short term and long term.
  • Shutterstock (SSTK): It's a giant in the digital image industry, and a good buy thanks to growing earnings and a price target almost twice its current price.
  • Avanos Medical (AVNS): This healthcare industry stock looks good to buy on a pullback thanks to expected earnings gaining over 70% in the next two years.
  • Proto Labs (PRLB): It's down significantly from its yearly high, but buy on further weakness for a strong gross margin.
  • Sonos (SONO): This company that makes wireless speakers and other audio products is down around 50% but earnings should grow 27% next year.
  • John Bean Technologies (JBT): This company has been more than cut in half, and 19% earnings growth is expected next year.
  • Griffon Corporation (GFF): It sells garage doors and rolling steel doors, and it looks like a buy now.
  • Boise Cascade (BCC): It's benefiting from the housing demand, with big-time earnings.
Undervalued Small-Cap Stocks - 7 Undervalued Small-Cap Stocks to Buy Now

Source: akamakis / Shutterstock.com

In this down-to-sideways market, it is important to look for undervalued stocks, both as a hedge against the downside and for opportunity on the upside. And since the small-capitalization asset class has performed so badly compared to the large-caps, investors should look for undervalued small-cap stocks now to get outsized returns.

On a one-year time frame, according to Morningstar.com, and using the core characteristic sector, which is a blend of growth and value, the U. S. large-cap sector is down 10.20%, while the U.S. small-cap sector is down 18.77%; over three years, the large-cap sector is up 9.87% per year, while the small-cap sector is up 2.3% per year; and over five years, the large-cap sector has climbed 8.48% per year, while the small-cap sector has gone up only 3.03% per year.

The following stocks are my top picks among undervalued small-cap stocks to consider buying.

SSTK Shutterstock $60.09
AVNS Avanos Medical $27.78
PRLB Proto Labs $48.21
SONO Sonos $21.29
JBT John Bean Technologies $113.11
GFF Griffon Corporation $27.26
BCC Boise Cascade $64.05

Shutterstock (SSTK)

Neon sign of the Shutterstock logo glowing against an exposed brick wall in the San Francisco office of Shutterstock, Inc. (NYSE: SSTK).

Source: Nova Patch / Shutterstock.com

Stock media company Shutterstock (NYSE:SSTK) has come down over 50% from its 52-week high, and the Yahoo analysts report it as undervalued with a 38% estimated return. The company’s earnings are expected to grow: The analysts reporting to Yahoo expect it to earn $3.64 per share this year, which is up from $3.48 last year, and next year it’s expected to earn $4.04 per share.

There are four analysts offering a 12-month price forecast to CNN Business, and they have a $110 median per-share target on the stock. SSTK is therefore one of the undervalued small-cap stocks to buy for long-term appreciation.

Shutterstock is in the digital imagery industry, which is growing and finding new applications. Almost all the company’s income comes from its content division, which offers photographs, art, video clips and other products to subscribers. Most of its sales comes from its shutterstock.com site. The company claims that over 1 billion images, videos, and music tracks have been downloaded.

Avanos Medical (AVNS)

a photo of a stethoscope laying atop medical papers

Source: Shutterstock

Avanos Medical (NYSE:AVNS) supplies a variety of chronic care products and devices in the U.S., North America, and all over the world. Also, the company has many products that deal with pain and do not contain opioids. It sells its wide collection of products to hospitals, healthcare providers and other healthcare facilities such as hospitals, as well as distributors.

Avanos Medical also produces digestive health products, such as feeding tubes, and pediatric feeding products.

Avanos Medical has good earnings: TipRanks.com expects AVNS to release earnings on Aug. 8, and for the second quarter 2022 period, the consensus forecast is 38 cents against last year’s earnings of 21 cents.

The analysts reporting to Yahoo.com put it at 68.9 times trailing earnings. But the analysts also show good earnings growth: from $1.15 per share last year, AVNS is expected to make $1.64 this year, and $1.97 next year, cutting its multiple significantly. This makes it one of the undervalued small-cap stocks to buy on a pullback.

Proto Labs (PRLB)

A photograph of the inside of a factory showing machinery and conveyer belts.

Source: Roman Zaiets/ShutterStock.com

Proto Labs (NYSE:PRLB) was founded to reduce the time that it took to develop plastic parts, and the solution it found was to develop software that communicated directly with mills and presses.

Proto Labs then expanded their injection device and opened plants in Europe.

The stock is down close to 50% from its 52-week high. Zacks Investment Research has a forward price/earnings ratio on the stock of 32 times, and earnings this year of $1.55 per share, the same as $1.55 per share last year.  That is a high multiple on a stock with flat earnings. But Proto Labs claims it “is the world’s leading provider of digital manufacturing services” and that in the first quarter “gross margin was 44.9 percent of revenue,” which is very strong.

Buy this undervalued small-cap stock on further weakness.

Sonos (SONO)

An image of waveforms.

Source: fantasyform/Shutterstock.com

Sonos (NASDAQ:SONO) is another stock that is down about 50% from its 52-week high and looks undervalued here. Sonos has developed and owns patents related to audio devices. Sonos claims “A wireless multiroom speaker system is the easiest way to listen to music, podcasts, and other audio entertainment in more than one room at a time, and we think Sonos is the best option.”

The company develops and sells multi-room audio products throughout the world. Sonos makes wireless speakers, components and other products for consumers.

Although earnings this year are expected to be about flat from last year — the analysts reporting to Yahoo.com estimates average earnings of $1.14 per share compared to earnings of $1.13 per share last year — next year the average of the analysts’ earnings estimate is $1.45 a share, 27% higher.

The stock can be bought here, or hold off until it drops more, for long term growth.

John Bean Technologies (JBT)

a close-up shot of an airplane engine

Source: frank_peters / Shutterstock.com

Zacks Investment Research estimates good earnings ahead for food and aerotech company John Bean Technologies (NASDAQ:JBT): last year JBT made $4.03 per share; this year the Zacks estimates $5.12 per share. Zacks also estimates that the company will grow 15.89% for the next three to five years and puts its PEG ratio at 1.41. That is a reasonable ratio for a growing company.

For next year, the analysts reporting to Yahoo.com estimate that earnings for John Bean will be $6.09, up 19%. This company is an undervalued small-cap stock that is worth considering.

JBT is down about 57% from its 52-week high.

The company operates out of two divisions: JBT FoodTech and JBT AeroTech. It offers technology services to the food and beverage industry and various services to the air transportation industry. Also, John Bean helps the airport industry with airport equipment, maintenance services, ground handling equipment and other services.

Griffon Corporation (GFF)

A photo of a person in a neon green vest holding blueprints and standing behind a white table covered with supplies like pencils, a computer, a ruler and two wooden house shapes.

Source: ARMMY PICCA/ShutterStock.com

Griffon Corporation (NYSE:GFF) makes and distributes consumer and professional products and home and building products under a variety of brands. One of the brand names, AMES, is one of the oldest companies in the U.S., and Griffon claims AMES is the leading global maker of tools and products for home storage, landscaping, and other items used for an outdoor lifestyle.

Griffon also is the largest manufacturer and seller of garage doors and rolling steel doors in North America. The company sells them through the Clopay, Ideal, and Holmes names.

Tipranks expects GFF to announce its third-quarter 2022 earnings in August. TipRanks.com states that the consensus analysts’ earnings per share forecast reported to them is 99 cents a share; this compares with 43 cents per share for the same time last year. Yahoo.com has Griffon’s trailing price/earnings ratio at 13.5, trailing 12 months.

This is a very low multiple for a growth stock, making GFF an undervalued small-cap stock that can be bought here.

Boise Cascade (BCC)

Source: Shutterstock

Boise Cascade (NYSE:BCC) makes and distributes building materials. The company operates throughout North America, producing environmentally friendly products made from wood, including panels and lumber. BCC also operates a wholesale distribution division, delivering many wood, cement and metal products.

On June 10, the company announced that it was acquiring Coastal Plywood Company for $512 million. Coastal is big, employing 750 people. Coastal distributes plywood, lumber, and other products in the eastern U.S.

BCC sells at a modest 3.52 forward price/earnings multiple, according to Zacks Investment Research, and the company is estimated to earn $18.17 per shares this year. Last year, BCC earned $17.97 per share.

Zacks has a PEG ratio on the stock at 1.54, which is a bit high, making me conclude that investors should watch it, and buy it on any weakness. BCC could be looked at as a way to profit from the high demand for housing, which would make it another of the  undervalued small-cap stocks that could continue growing.

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.

Max Isaacman is an Investment Advisor Representative in San Francisco. He was a Merrill Lynch Representative and a Vice President of Lehman Brothers. His investment books were published by McGraw-Hill and Financial Times Press, including the first book on ETFs, How to be an Index Investor (McGraw-Hill, 2000). He wrote for the Emmy award-winning Website Minyanville.com. His email is exch13@aol.com.


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