In a week marked by mixed performances in major indices and subdued trading ahead of the holiday weekend, value stocks have notably outperformed growth shares. Amid these market dynamics, small-cap stocks present intriguing opportunities for investors, particularly those with recent insider activity signaling potential undervaluation. Identifying a good stock often involves looking at factors such as strong fundamentals, positive insider activity, and alignment with current economic indicators. In this context, let's explore three top undervalued small-cap stocks that have recently caught the attention of insiders.
Overview: Assura is a UK-based real estate investment trust specializing in the development and management of primary care properties, with a market cap of approximately £2.20 billion.
Operations: Assura generates revenue primarily from its core segment, with the latest reported figure being £157.8 million. The company's gross profit margin has shown a slight decline from 95.75% in Q3 2016 to 90.81% in Q1 2024. Operating expenses and non-operating expenses have significantly impacted net income margins, which have varied widely over recent periods, reaching as high as 113.88% in Q1 2022 and falling to -110.03% in Q3 2023 due to substantial non-operating costs.
PE: -45.5x
Assura, a healthcare real estate investment trust, recently announced a 0.84 pence per share dividend payable on October 9, 2024. They acquired a private hospital portfolio in August 2024, expanding their asset base. Despite relying solely on external borrowing for funding, Assura's debt is well-covered by operating cash flow. Earnings are forecast to grow annually by 41.82%. Insider confidence is evident with recent share purchases from July to September 2024, suggesting optimism about future prospects for this small-cap stock.
Overview: Puregold Price Club operates a chain of supermarkets in the Philippines, focusing on retailing groceries and consumer goods, with a market cap of approximately ₱110.45 billion.
Operations: Puregold Price Club generates revenue primarily from its retailing business, with a notable gross profit margin of 17.49% as of the latest period. The company's cost structure is heavily influenced by the cost of goods sold (COGS), which accounts for a significant portion of expenses. Operating expenses, including general and administrative costs, also play a substantial role in the financials. Net income margin stands at 4.43%, reflecting profitability after accounting for all operating and non-operating expenses.
PE: 9.4x
Puregold Price Club, a smaller player in the retail sector, recently reported half-year sales of PHP 98.5 billion and net income of PHP 4.9 billion, reflecting growth from the previous year's figures. Notably, insider confidence is evident with Leonardo Dayao purchasing 20,000 shares worth PHP 550,550 in August 2024. Despite relying on external borrowing for funding—considered higher risk—the company forecasts an annual earnings growth of over 11%, suggesting potential for future value appreciation.
Overview: Security Bank is a financial institution providing retail and business banking, financial markets, and wholesale banking services with a market cap of ₱94.36 billion.
Operations: The company's revenue primarily comes from Wholesale Banking, followed by contributions from Retail and Business Banking segments. Despite consistent gross profit margins of 100%, net income margins have shown fluctuations, peaking at 48.86% in Q1 2015 and dipping to 19.53% in Q2 2021. Operating expenses have steadily increased over the periods, impacting overall profitability.
PE: 5.6x
Security Bank, a small-cap stock, has shown significant insider confidence with recent purchases by key executives. Despite a high level of bad loans at 3.4%, the bank's earnings are forecast to grow 15.73% annually. The second quarter of 2024 saw net interest income rise to PHP 10.93 billion from PHP 8.29 billion year-on-year, while net income increased to PHP 2.82 billion from PHP 2.56 billion in the same period last year, indicating strong financial performance amidst challenges in loan management.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include LSE:AGR PSE:PGOLD and PSE:SECB.
