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3 Promising Small-Cap Value Stocks Wall Street Recommends for Growth in 2024

Hannah Perry | October 3, 2024

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3 Small-Cap Value Stocks Wall Street Loves Right Now

Investing in Small-Cap Stocks: A Road to Potential Growth

With the U.S. economy steadily recovering, the current investment climate paints a promising picture for small-cap stocks. Known for their robust growth potential, impressive yield possibilities, and ability to capture market share, these stocks are drawing significant attention from Wall Street. As we explore small-cap value stocks favored by analysts, we’ll delve into Caleres, Inc. (CAL), Smith & Wesson Brands, Inc. (SWBI), and Ribbon Communications Inc. (RBBN).

The Current Economic Landscape

In 2024, the U.S. economy continues to demonstrate resilience and growth. The economy grew by 1.6% in the first quarter, accelerating to an annualized rate of 3% in the second quarter. This growth has been fueled by government spending, increased business investments, and robust consumer spending. With these upward trends expected to continue, small-cap stocks—defined as companies with a market capitalization below $2 billion—become particularly enticing for investors.

Historically, small-cap stocks have outperformed their large-cap counterparts. The Russell 2000 Index reported a return of 22.98%, while the S&P Global SmallCap gained 20.75% in the last year. With ongoing technological innovations and investments, there are more opportunities now than ever for small-cap companies to expand and capture greater market share. This leads us to consider three small-cap stocks that stand out: CAL, SWBI, and RBBN.

Caleres, Inc. (CAL – Get Rating)

Caleres engages in the retail and wholesale of footwear internationally. The company operates under segments such as Famous Footwear and Brand Portfolio, offering a diverse mix of licensed, branded, and private-label athletic, casual, and dress footwear products.

When analyzing CAL’s financials, it appears promising. The stock is currently trading at a forward Price/Sales (P/S) ratio of 0.42, which is significantly lower than the industry average of 0.94. The forward Price/Book (P/B) multiple of 1.60 is also 38.9% lower than the industry average of 2.63. Furthermore, CAL declared a quarterly cash dividend of $0.07 per share on August 29, which shows the company’s commitment to returning value to its shareholders.

In terms of performance, CAL reported net sales of $683.32 million in its second quarter, alongside a gross profit of $310.88 million. Analysts predict a revenue increase of 3.3% for the fiscal year ending January 2026, with earnings per share (EPS) expected to rise by 12%. Its stock has notably increased by 15.7% over the past year, indicating positive momentum and strong market positioning.

Smith & Wesson Brands, Inc. (SWBI – Get Rating)

Specializing in firearms manufacturing, Smith & Wesson offers a broad range of products, including handguns, long guns, and firearm-related accessories.

SWBI has attractive valuation metrics, trading at a forward non-GAAP Price/Earnings (P/E) ratio of 12.33, which is notably below the industry average of 17.17. The company has reported net sales of $88.33 million for the first quarter ending July 31, 2024, with analysts projecting a revenue increase of 6.9% for the second quarter.

Despite a 2% dip in share price over the past year, SWBI’s fundamentals and strong brand equity suggest resilience. The company’s POWR Ratings reflect a B grade for both Value and Momentum, positioning it as a viable choice for growth-oriented investors.

Ribbon Communications Inc. (RBBN – Get Rating)

Ribbon Communications is a leading provider of communication technology, specializing in solutions for voice-over IP and 5G communications.

RBBN currently trades at a forward EV/EBIT ratio of 9.12, significantly below the industry average of 19.90. The company’s revenue for the second quarter stood at $192.62 million, with a gross profit increase of 6.4% year-over-year.

Looking ahead, analysts expect RBBN’s revenue to grow by 1.7% and EPS to expand by 14.3% for the fiscal year 2024. With shares increasing by 21% over the past year, RBBN’s bright prospects are evident, solidifying its status as a key player among small-cap stocks.

Conclusion

The current economic recovery in the U.S. provides a fertile ground for small-cap stocks like Caleres, Smith & Wesson, and Ribbon Communications to thrive. Each company boasts strong fundamentals, leading to potential value for investors looking to diversify their portfolios with promising growth opportunities. With the right analysis and an eye for emerging trends, adding these small-cap stocks to your investment arsenal may yield fruitful returns in the coming years.