The 3 Most Undervalued Small-Cap Stocks to Buy in February 2024

Gabriel Osorio-Mazzilli

February 12, 2024 4 min read

There are many types of companies in the financial markets, firstly from different sectors, and secondly, they can vary according to their capitalization size. Their capitalization can go by various factors, either the time they have been in the stock market, their attractiveness, or the great appetite of investors for the company, among many others. Still, in theory, the capitalization of a company is not an indication by itself that a company is good or bad; to determine that, you must study the company. Here are three undervalued small-cap stocks with great potential for future growth that you can consider adding to your portfolio.

Small-Cap Stocks: Enova (ENVA)

Source: Enova International

Let’s start this review of small-cap stocks with Enova International (NYSE:ENVA), which is a company that operates in the financial sector, using advanced technology and a lot of analytics to offer a wide variety of financial products and services to its customers.

Its latest quarterly report reported a 20% increase in total revenues compared to the previous quarter, which is a good number for an increase. That revenue growth can be translated into $584 million.

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In addition, they had a significant increase in earnings per share as well, with diluted earnings per share of $1.13 and adjusted earnings per share of $1.83.

They are doing things right, as they also had strong growth in loans and receivables, which increased 16% to approximately $3.3 billion.

In addition to demonstrating this incredible growth, they have shown great credit performance with a positive outlook, even demonstrating a healthy net income margin and an increase in their portfolio’s fair value.

They recently issued $400 million in due 2028 senior notes, with a favorable interest rate of 11.25%. They have a very optimal and effective management of their finances, which is an excellent example of the quality and excellence of their financial services.

Target Hospitality (TH)

Woman standing in hotel room with luggage looking at the view. Hotel stocks.

Source: Boyloso / Shutterstock

Next on the list is Target Hospitality (NASDAQ:TH), which specializes in modular accommodations and hospitality services.

It focuses on including customized solutions to suit the different needs of consumers, ranging from governmental to humanitarian accommodations.

Their last financial report indicated a slight decrease in revenue compared to the previous year. However, that has not impeded their growth, as they have also demonstrated a significant increase in net income and adjusted EBITDA.

They have a great capacity to adapt to any circumstance and maintain an excellent financial position.

As part of their strategic moves and good news, they have acquired a key humanitarian contract, the Influx Care Facility (ICF), demonstrating their strong commitment to providing humanitarian solutions.

One of the key benefits of this contract is that, together with their non-profit partnership, it allows Target Hospitality to earn substantial minimum revenue over the next few years, which, in conjunction with their completion of the senior notes offering, makes clear the company’s excellent financial strength and commitment to future growth.

Harmony Biosciences (HRMY)

doctor holding tablet with graphic of dna

Source: Shutterstock

To top off this list of investment prospects with good future returns, we have Harmony Biosciences Holdings (NASDAQ:HRMY), which operates in the biotechnology sector and is in charge of improving the quality of life and health of people with sleep disorders and neurological diseases.

They have a flagship product called WAKIX, which has experienced significant growth in sales, generating net revenues of approximately $160.3 million, which is practically a new record for its demand.

The number of patients using this drug increased to approximately 5,800. Without any doubt, it has had exponential growth, which goes hand in hand with the significant financial development of the company, which they have even combined with an excellent financial strategy of share repurchase, as indicated in their latest quarterly report.

But Harmony’s success does not end there, as they announced positive results from their phase 2 study, which evaluated the potential of Pitolisant to treat severe daytime sleepiness and fatigue in patients with myotonic dystrophy type 1 (DM1).

Of course, all this is more than good news and a solid foundation for great future growth, not only financially but also with a great expansion in the market.

As of this writing, Gabriel Osorio-Mazzilli did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Gabriel Osorio is a former Goldman Sachs and Citigroup employee. He possesses discipline in bottom-up value investing and volatility-based long/short equities trading.