3 Top-Rated Micro-Cap Stocks That Still Look Like Bargains

July 08, 2022 at 12:05 PM EDT

Concerns over the Fed’s aggressive monetary tightening and the bearish market sentiments have created opportunities for investors to buy quality stocks at bargain prices. Micro-cap stocks Core Molding Technologies, Inc. (CMT), Adams Resources & Energy, Inc. (AE), and Assertio Holdings, Inc. (ASRT) are trading at a discount to their peers despite delivering positive returns year-to-date. Therefore, these top-rated stocks in our proprietary rating system could be solid additions to your watchlist. Keep reading…

The stock market has witnessed an extended sell-off this year due to the Federal Reserve’s aggressive interest rate hikes to combat rising inflation and consequent economic slowdown. Fed policymakers indicated further interest-rate hikes in the upcoming quarters after last month’s biggest hike since 1994. The tightening of monetary policy raises recession concerns and will likely keep the market under pressure.

The market sell-off has led to the S&P 500 declining 18.1% year-to-date. At the same time, the Dow Jones Industrial Average and the Nasdaq Composite Index have declined 13.6% and 25.7% year-to-date, respectively.

The bearish market sentiment provides a golden opportunity for investors because many quality stocks are now trading at attractive valuations. Investing in fundamentally sound stocks at the current cheap valuations could help generate significant returns in the long run.

Despite the broad-based market sell-off, fundamentally strong micro-cap stocks Core Molding Technologies, Inc. (CMT), Adams Resources & Energy, Inc. (AE), and Assertio Holdings, Inc. (ASRT) are up for the year.

These stocks are trading at a discount to their peers and are rated Strong Buy in our proprietary POWR Ratings system. So, it could be wise to add these stocks to your watchlist.

Core Molding Technologies, Inc. (CMT)

CMT is an engineered materials company specializing in molded structural products, principally in building products, utilities, transportation, and power sports industries across North America and Mexico. It has a market capitalization of $77.99 million.

The stock’s trailing-12-month EV/Sales multiple of 0.34x is 76.6% lower than the industry average of 1.44x. In addition, CMT’s trailing-12-month EV/EBITDA of 4.70x is 32.3% lower than the industry average of 6.94x. The stock has gained 7.9% year-to-date to close the last trading session at $9.43.

CMT’s net sales increased 24.4% year-over-year to $90.59 million for the first quarter ended March 31, 2022. The company’s operating income grew 12.5% year-over-year to $6.01 million. Its adjusted EBITDA stood at $9.52 million, up 10.7% year-over-year. Also, its net income increased 11.8% year-over-year to $3.86 million, while its EPS came in at $0.46, up 12.2% from the prior-year period.

CMT’s POWR Ratings reflect solid prospects. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

CMT has an A grade for Growth and Value and a B for Sentiment and Quality. It is ranked first among 42 stocks in the A-rated Industrial - Manufacturing industry. Click here to see the other ratings of CMT for Momentum and Stability.

Adams Resources & Energy, Inc. (AE)

With a $138.90 million market cap, AE is engaged in the marketing, transportation, terminalling, and storing of various crude oil and natural gas basins in the United States. The company operates through three segments: Crude Oil Marketing, Transportation, and Storage; Tank truck Transportation of Liquid Chemicals, Pressurized Gases, Asphalt, and Dry Bulk; and Pipeline Transportation, Terminalling and Storage of Crude Oil.

In terms of 0.02x forward EV/S, the stock is trading 99% lower than its industry average of 1.66x. Also, its 1.58x forward EV/EBITDA is 72.1% lower than its industry average of 5.66x. The stock has gained 14.3% year-to-date to close the last trading session at $31.80.

AE’s total revenues increased 137.9% year-over-year to $774.25 million for the first quarter ended March 31, 2022. Its operating earnings grew 111.6% from its prior-year quarter to $8.15 million, while its net earnings grew 116.9% from its year-ago value to $6.09 million. The company’s EPS improved 110.6% from its year-ago value to $1.39.

The consensus EPS estimate of $3.46 for the fiscal year ending December 31, 2022, represents a 25.8% improvement year-over-year. The revenue estimate for the same period is expected to amount to $3.12 billion.

AE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.

It also has an A grade for Value and a B for Momentum, Sentiment, and Quality. It is ranked first out of 97 stocks in the B-rated Energy - Oil & Gas industry. Click here to see the other ratings of AE for Growth and Stability.

Assertio Holdings, Inc. (ASRT)

ASRT is a specialty pharmaceutical company that offers medicines in different treatment areas, including neurology, pain, and inflammation. The company provides INDOCIN, an oral solution to treat moderate to severe rheumatoid arthritis, and CAMBIA, a non-steroidal anti-inflammatory drug (NSAID). ASRT has a market capitalization of $148.57 million.

On March 31, 2022, ASRT partnered with BlinkRx to support healthcare professionals and patients undergoing treatment with Otrexup with a unique access solution. Dan Peisert, President and CEO of ASRT, said, “This builds upon our existing pharmacy hub capabilities with a new direct-to-patient model for those who prefer a convenient digital option.”

In terms of forward non-GAAP P/E and PEG, ASRT’s 5.95x and 0.59x are lower than the industry averages of 19.32x and 1.82x, respectively. Moreover, its forward EV/Sales of 1.20x is 68.6% lower than the industry average of 3.83x. ASRT has gained 50% year-to-date to close the last trading session at $3.27.

For the fiscal first quarter ended March 31, 2022, ASRT’s net revenue increased 36.1% year-over-year to $36.54 million. Its adjusted EBITDA grew 52.2% from the year-ago value to $23.86 million, while its adjusted earnings improved 70.3% year-over-year to $17.53 million. The company’s adjusted EPS increased 40.7% from its year-ago value to $0.38.

For the quarter ended June 30, 2022, ASRT’s revenue is expected to increase 25.2% year-over-year to $31.78 million. The Street expects its EPS to be $0.08 for the same period.

ASRT’s POWR Ratings reflect these solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

It also has an A grade for Growth, Value, Sentiment, and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #7 out of 170 stocks. To see the other ratings of ASRT for Momentum and Stability, click here.

CMT shares were trading at $9.22 per share on Friday afternoon, down $0.21 (-2.23%). Year-to-date, CMT has gained 8.34%, versus a -17.40% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.

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