Small-cap stocks can be riskier than popular large-cap companies, but the right small-caps can offer much more upside than large-caps.
Many of these small-caps receive limited analyst coverage, which means you can sometimes find great businesses at bargain prices.
If you’re looking for overlooked stocks that look undervalued today, these 10 small-caps might be worth a closer look.
It’s important to remember that these picks are inherently riskier than large-cap stocks. However, small-caps tend to receive less analyst coverage than large-cap stocks, so you’re going to be more likely to find deals by sifting through small-cap land. Make sure to do your own research!
Here are the top 3 favorites from our list of 10 small-cap stocks with significant upside potential:
Seeing Machines (SEE)
- Market Cap: $150 million
- Industry: Electronic Equipment, Instruments, and Components
- Analyst Upside: 176%
- P/E Ratio: -4x
Company Overview: Seeing Machines is a technology company that develops AI-powered driver monitoring systems (DMS) to enhance vehicle safety by tracking driver attention, fatigue, and distraction.
Business Strategy: Seeing Machines licenses its DMS technology to automotive and fleet partners, earning revenue through hardware integration and recurring software fees. The company focuses on regulatory-driven growth, long-term OEM partnerships, and scaling its aftermarket Guardian solution across commercial fleets.
Recent Developments:
- Regulatory Tailwinds in Automotive Safety: The European Union’s General Safety Regulation (GSR) mandates driver monitoring systems (DMS) in new vehicles starting July 2024, with further requirements by July 2026. Seeing Machines’ technology aligns with these regulations, positioning the company for increased adoption.
- Strategic Partnership with Mitsubishi Electric: Mitsubishi Electric Mobility’s investment of £26 million for up to a 19.9% stake provides Seeing Machines with financial stability and access to Japanese automotive markets, potentially accelerating the adoption of its DMS technology.
- Expansion of Guardian Aftermarket Business: The launch of Guardian Generation 3 has led to a 19% year-over-year increase in connected units, reaching over 62,000 vehicles. This growth in the aftermarket segment contributes to recurring revenue streams.
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Travelzoo (TZOO)
- Market Cap: $165 million
- Industry: Interactive Media and Services
- Analyst Upside: 77%
- P/E Ratio: 11x
Company Overview: Travelzoo is a global internet media company that publishes exclusive travel, entertainment, and lifestyle deals to its subscriber base.
Business Strategy: Travelzoo generates revenue on its travel sites through advertising fees paid by travel and leisure businesses looking to reach its audience. Its strategy centers on offering curated, high-quality deals to keep its subscriber base engaged and to build a trusted brand in travel discovery.
Long-Term Growth Drivers:
- Shift to Membership-Based Revenue Model: Travelzoo is transitioning to a membership model, which may provide more predictable revenue and strengthen customer loyalty.
- International Expansion: The company’s growth in international markets, including Europe and Asia, could diversify its revenue base and reduce dependence on any single region.
- Enhanced Mobile Platform: Improvements to Travelzoo’s mobile app and website aim to provide a better user experience, potentially attracting more users and increasing bookings.
Track Travelzoo’s growth trends and analyst forecasts on TIKR (it’s free) >>>
Natural Gas Services Group (NGS)
- Market Cap: $250 million
- Industry: Energy Equipment and Services
- Analyst Upside: 76%
- P/E Ratio: 16x
Company Overview: Natural Gas Services Group provides equipment and services for natural gas production and processing, focusing on compression rental and manufacturing. Compression equipment refers to machines that compress natural gas so it can flow efficiently through pipelines or be stored safely.
Business Strategy: The company earns revenue by leasing and selling compression equipment, while aiming to expand its rental fleet and maintain steady demand from upstream energy producers.
Recent Developments:
- Expansion in the Permian Basin: NGS is focusing on growing its operations in the Permian Basin, a region with high demand for natural gas services, which could drive revenue growth.
- Investment in High-Horsepower Compression Units: The company’s investment in large horsepower and electric drive compression units positions it to meet the evolving needs of the energy sector.
- Strong Financial Position: NGS’s solid balance sheet and recent expansion of its credit facility provide the financial flexibility to pursue growth opportunities.
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TIKR Takeaway
These small-cap stocks may fly under the radar, but each one has real potential for long-term growth, and analysts think they’re undervalued today.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
