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Generally, enterprises that fall on the low end of the capitalization spectrum are risky but if you really want to go for it, you might as well consider undervalued small-cap stocks. When you’re fishing in the small pond, you’re already dealing with underappreciated ideas. We’re just adding to the risk-reward profile by taking on the valuation component.
Of course, the idea here is that we’re going to target (arguably) the least-appreciated ideas among some of the smallest enterprises that are still traded on major exchanges. It goes without saying that you should expect a firestorm of volatility. Don’t come in here without your flak jacket.
That said, if the stars align just right, you might see some ridiculously robust rewards. You want to go yard? You gotta swing the bat first. On that note, below are undervalued small-cap stocks to buy.
International Money Express (IMXI)
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A money transferring enterprise, International Money Express (NASDAQ:IMXI) may seem a tough choice for undervalued small-cap stocks. What it comes down to is that the company faces tough competition. However, the flipside to the argument is that IMXI enjoys a burgeoning total addressable market. If you have some funds earmarked for speculation, this might be the opportunity for you.
According to Grand View Research, the global remittance market reached a valuation of $48.99 billion in 2021. Further, experts project that between 2022 to 2030, the segment may expand at a compound annual growth rate (CAGR) of 10.1%. At the forecast’s culmination point, the sector could be worth $107.8 billion.
Not only that, covering experts believe that revenue for this fiscal year should land at $691 million. That would be up 4.9% from last year’s tally. Also, 2025 sales should hit $755.1 million, up 9.3% from 2024’s projected top line.
Lastly, the consensus view is strong buy with a $26 average price target. That implies upside of 28%.
Precision Drilling (PDS)
Source: Golden Dayz / Shutterstock.com
Based in Calgary, Alberta, Canada, Precision Drilling (NYSE:PDS) is the nation’s largest drilling rig contractor. Further, per its public profile, Precision provides oil field rental and supplies. At first glance, PDS might also appear a questionable idea for undervalued small-cap stocks. That’s because the political and ideological winds favor clean and renewable energy infrastructure. Still, hydrocarbons have their place.
First, there’s the science. Fossil fuels command high energy density. Essentially, you can do more with a gallon of gasoline than you can with an equivalent amount of electrons. Second, the world runs on hydrocarbons. And because of that, geopolitical rumblings should make enterprises like Precision Drilling surprisingly relevant.
Looking out to the end of fiscal 2024, analysts believe that revenue will land at $1.5 billion, up 4.3% from last year’s print of $1.44 billion. Even with the projected growth, PDS trades for only 0.63X trailing-year sales, below the sector median 1.09X.
In closing, analysts peg shares a unanimous strong buy with a $90.33 price target, projecting 47% growth potential.
Titan Machinery (TITN)
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One of the largest dealers of agricultural and construction equipment, Titan Machinery (NASDAQ:TITN) plays a significant role in the broader global food supply chain. Still, that reality doesn’t seem to impress Wall Street. Since the beginning of this year, TITN dropped more than 11% of equity value. In the trailing one-year period, it’s down almost 37%, a terrible loss.
Still, the pain might be overdone. For one thing, by the end of this fiscal year, analysts projected earnings per share to land at $4.92. That would be noticeably above last year’s print of $4.52. Further, revenue should reach $2.64 billion. If so, that would imply a 19.4% gain from last year’s sales of $2.21 billion.
Even better, TITN could be one of the undervalued small-cap stocks you can trust on the basis of its relevant business. Speaking of which, shares trade at only 5.44X trailing-year earnings. That’s well below the sector median of 13.55X.
Finally, analysts rate shares a unanimous strong buy with a $39.33 price target. That implies upside of over 54%.
On the date of publication, Josh Enomoto 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.comPublishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
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