Over the last 7 days, the United States market has experienced a 2.1% drop, yet it remains up by 30% over the past year with earnings projected to grow by 15% annually. In this dynamic environment, identifying stocks that are perceived as undervalued and show insider activity can offer intriguing opportunities for investors seeking potential growth within the small-cap segment.
Top 10 Undervalued Small Caps With Insider Buying In The United States
Overview: Mercer International operates in the pulp and solid wood sectors with a market capitalization of $0.53 billion.
Operations: The company generates revenue primarily from its Pulp and Solid Wood segments, with the Pulp segment contributing significantly more. Over recent periods, there has been a notable decline in net income margins, with the most recent quarter showing a net loss and a gross profit margin of 11.67%. The cost of goods sold (COGS) remains high relative to revenue, impacting profitability.
PE: -2.2x
Mercer, a small-cap player in the U.S., has been navigating financial challenges with declining earnings over five years and debt not well covered by operating cash flow. Despite these hurdles, recent insider confidence is reflected in share purchases. The company reported a net loss reduction for Q3 2024 compared to the previous year and announced a $0.075 per share dividend payable in December. Additionally, Mercer completed a $200 million debt offering to refinance existing obligations, reducing total debt by $100 million.
Overview: Armada Hoffler Properties is a real estate investment trust that engages in office, retail, and multifamily residential real estate operations as well as general contracting and real estate services, with a market cap of approximately $1.13 billion.
Operations: The company's revenue streams are primarily derived from General Contracting and Real Estate Services, Retail Real Estate, Office Real Estate, and Multifamily Residential Real Estate. The cost of goods sold (COGS) has seen a rise over the periods, impacting the gross profit margin which was 41.87% at its peak in December 2018 but showed a declining trend to 25.98% by September 2024. Operating expenses have also increased over time, contributing to fluctuations in net income margins that have turned negative in recent periods.
PE: -60.1x
Armada Hoffler Properties, a small-cap real estate investment trust, recently reported Q3 2024 earnings with sales at US$68.6 million, up from US$62.91 million year-on-year, yet faced a net loss of US$7.53 million compared to last year's profit of US$8.23 million. Insider confidence is evident with recent stock purchases by insiders this year, indicating potential belief in future growth despite challenges like external borrowing risks and past shareholder dilution through equity offerings raising US$94.5 million in September 2024.
Overview: Methode Electronics is a company that designs and manufactures custom-engineered solutions for various industries, including automotive, industrial, and interface sectors, with a market capitalization of approximately $1.3 billion.
Operations: Methode Electronics generates revenue primarily from its Automotive and Industrial segments, with the Automotive segment contributing $586.20 million and the Industrial segment $487.90 million. The company has seen fluctuations in its gross profit margin, which was 27.39% in early 2017 but declined to 15.77% by mid-2024, reflecting changes in cost of goods sold relative to revenue over time.
PE: -2.3x
Methode Electronics, a company with a focus on mechatronic products, has faced significant challenges recently. Legal issues have emerged due to alleged misleading statements about their automotive segment's performance and operational inefficiencies. Despite these hurdles, insider confidence is evident as Independent Director David Blom purchased 9,320 shares for approximately US$100,749 in early 2024. Additionally, the company repurchased 136,000 shares between April and June 2024. Moving forward, Methode aims to stabilize operations under new leadership and address its strategic shortcomings while anticipating improved sales by fiscal year 2026.
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.
