Although financial advisors typically direct your attention toward established (and therefore more predictable) enterprises, ignoring protocol and moving some funds toward under-the-radar small-cap stocks may offer significant upside. In this case, we’re talking about an average of roughly 50%. That’s well above what you can normally expect from the benchmark equities index, which nets you around 8% on average.
Now, how did I get my 50% upside target? Rather than pulling numbers out of a certain cavernous area, I first filtered all the financially compelling under-the-radar small-cap stocks. These feature a baseline of fiscal stability and may be undervalued, either based on earnings or sales. From there, I took the listed analyst price targets, averaged them out and 50% (well, 50.72%) was the result.
Of course, arguments can always erupt regarding these types of topics. Therefore, I’m going to do my best to keep this narrative as objective (meaning by the numbers only) as possible. So, without any more delay, below are the under-the-radar small-cap stocks to consider.
REX REX American Resources $32.18 HZO MarineMax $34.47 AOSL Alpha and Omega Semiconductor $31.39 MIXT MiX Telematics $7.49 NATR Nature’s Sunshine $9.99 ASYS Amtech Systems $9.61 JRSH Jerash Holdings $4.22
REX American Resources (REX)
Source: Matt Oaks / Shutterstock
A producer of producer and retailer of ethanol, distillers grains, and natural gas, REX American Resources (NYSE:REX) currently carries a market capitalization of under $537 million. As such, it’s one of the under-the-radar small-cap stocks, getting lost in the shadows of its larger energy counterparts. Nevertheless, the one analyst that covers REX rates it a moderate buy.
Interestingly, the expert pegs the forward price target at $38 even, implying slightly over 23% upside potential. To be fair, the analyst cuts a lonely figure. According to TipRanks, hedge fund sentiment rates negatively for the underlying enterprise. Nevertheless, against consensus earnings targets, REX performed reasonably well, only missing once since the fourth quarter of 2020.
Objectively speaking, the market prices REX at 0.63 times sales, below the sector median of 1.29 times. Also, shares trade hands at 1.22 times book value, below the sector median of 1.75 times. Finally, REX enjoys a strong balance sheet, characterized by a cash-to-debt ratio of 19.6%.
Source: shutterstock.com/Harry Powell
Specializing in the sales of boats and other water sports vehicles, MarineMax (NYSE:HZO) currently stands among the under-the-radar small-cap stocks because of outside fundamentals. With the consumer economy facing significant pressures, now doesn’t seem the best time to purchase a boat. Still, the obviously caters to a wealthier clientele, perhaps providing some economic insulation.
Presently, out of the five analysts covering MarineMax, three of them rate it a buy. Overall, HZO enjoys a consensus moderate buy view. Better yet, the average price target pings at $41.80, implying nearly 25% upside from the time of writing. As an added bonus, TipRanks notes that sentiment among hedge funds for HZO strikes as very positive.
Although the underlying business may face consumer-related headwinds, objectively, HZO rates as an undervalued investment. Currently, the market prices shares of HZO at 3.9 times forward earnings, whereas the sector median stands at 14.4 times. Also, shares trade hands at 0.33 times sales, below nearly 73% of the competition.
Alpha and Omega Semiconductor (AOSL)
Headquartered in Sunnyvale, California, Alpha and Omega Semiconductor (NASDAQ:AOSL) specializes in all areas of power semiconductor technology and business operations. Unfortunately, because of its exposure to the broader tech space, AOSL suffered significantly in 2022. In the trailing year, shares gave up over 40% of equity value. However, AOSL is attempting a comeback, gaining 5% in the trailing five sessions.
Presently, Alpha and Omega carries a consensus hold rating: one buy, one hold. To be fair, it’s not exactly the most encouraging assessment. Nevertheless, on average, the price target hits $38.50, implying over 27% upside potential. To inspire those still on the fence, the hedge fund sentiment ranks as very positive. These institutional players have been building a position since Q4 2021.
Objectively, Alpha and Omega enjoys a substantially undervalued business profile. The market prices AOSL at 1.9 times trailing earnings. In contrast, the sector median stands at 16.6 times. Also, the company trades at 0.93-times book value, favorably below 85% of its rivals. Thus, it makes for a great addition to under-the-radar small-cap stocks.
MiX Telematics (MIXT)
Based in South Africa, MiX Telematics (NYSE:MIXT) develops and implements connected fleet and mobile asset management solutions for customers across the globe. As of this writing, MiX carried a market cap of just under $180 million. Combined with its small value and geographical location, MIXT easily ranks among the under-the-radar small-cap stocks to consider.
While only one analyst covers the enterprise, the subsequent rating is a moderate buy. More impressively, the average price target stands at a lofty $12, translating to 58% upside potential from where I am. Your mileage might vary depending on the time you read this. Still, it’s likely going to be a sizable forecast for quite some time.
Looking at the company’s financials, the market prices MIXT at 1.2 times trailing sales. In contrast, the sector median is 2.34 times. As well, shares trade hands for 1.5-times book value, ranking favorably below 71% of the industry. If you’re looking for under-the-radar small-cap stocks that are way off the beaten path, MIXT is worth consideration.
Nature’s Sunshine Products (NATR)
Source: Lallapie / Shutterstock
To be fair, Nature’s Sunshine Products (NASDAQ:NATR) won’t be an investment for everyone. Per its public profile, Nature’s Sunshine is a manufacturer and multi-level marketer of dietary supplements, including herbs, vitamins, minerals, and personal care products. In the trailing year, NATR gave up a staggering 50% of its equity value.
Of course, those with heart problems will want to avoid high-risk under-the-radar small-cap stocks such as NATR. However, there’s a high reward potential to go along with the dangers. One analyst covers the company, rating it a moderate buy. Moreover, the expert assigned a price target of $15, implying nearly 61% upside potential.
Believe it or not, Nature’s Sunshine enjoys many positive attributes, including decent stability in the balance sheet. Moreover, the market prices NATR at 0.41 times sales. In contrast, the sector median is 0.96 times. Finally, the company enjoys a gross margin of 71.6%, enabling greater pricing flexibility.
Amtech Systems (ASYS)
Based in Tempe, Arizona, Amtech Systems (NASDAQ:ASYS) is a global supplier of semiconductor equipment and consumables to the power semiconductor industry. Per its website, Amtech serves the mobile, computing, industrial, automotive, telecom, and medical sectors. At the moment, Amtech carries a market cap of $129.5 million, ranking among the under-the-radar small-cap stocks.
However, unlike most of its peers, Amtech enjoys serious potential, at least to the one analyst covering ASYS. The Wall Street expert rates it a moderate buy. More importantly, the price target is set at $15, implying a return of slightly over 62%. As well, ASYS enjoys strong support from hedge funds. While current sentiment for these institutional investors is neutral, hedge funds have been generally building a position since Q1 2021.
On the financial front, ASYS is rated as objectively undervalued. Right now, the market prices shares of ASYS at 7.5 times trailing earnings. This compares favorably to the industry median of 16.6 times. Therefore, ASYS may deserve consideration among under-the-radar small-cap stocks.
Jerash Holdings (JRSH)
One of the riskiest ideas among under-the-radar small-cap stocks, I include Jerash Holdings (NASDAQ:JRSH) for completeness’ sake. If you’re looking for incredible returns, JRSH could be right for you. However, it’s a heckuva risk, let me warn you.
Fundamentally, Jerash ties into the whims of the discretionary consumer sector. The company is an apparel manufacturer, providing branded products for some of the world’s top fashion companies. Theoretically, this move should spread the risk out. At the same time, global recession fears temper enthusiasm.
Nevertheless, JRSH enjoys a moderate buy consensus rating from the one analyst covering the stock. Moreover, the price target stands at a lofty $8, representing over 87% upside potential.
Objectively, Jerash is undervalued. Currently, the market prices JRSH at 10.7 times trailing earnings, comparing favorably to the sector median of 13.5 times. Still, don’t enter into the company lightly because it’s a volatile example among under-the-radar small-cap stocks.
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.com Publishing 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.
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