In a market where big names often steal investors’ attention, small-cap stocks have been viewed skeptically on Wall Street due to their underperformance since 2019, exacerbated by rising interest rates.
However, Kornitzer Capital Management’s Chris Carter sees untapped potential in small-cap stocks, despite ongoing challenges from stubbornly high interest rates and the allure of growth giants such as Nvidia (NVDA). The portfolio manager’s strategy hinges on identifying attractively valued companies with robust margins, solid free cash flow, and enduring competitive advantages.
In this context, Carter highlighted three small-cap stocks – Bio-Techne Corporation (TECH), Match Group, Inc. (MTCH), and MarketAxess Holdings Inc. (MKTX) – which perfectly align with his investment philosophy and are currently overlooked by investors. Let’s take a closer look at them.
Small-Cap Stock #1: Bio-Techne Corp
With a market cap of $12.2 billion, Minnesota-based Bio-Techne Corporation (TECH) is a leading global life sciences company that offers innovative tools and bioactive reagents for the research and clinical diagnostics sectors. The company’s products support scientific investigations into biological processes and disease progression, facilitate drug discovery, and enable precise clinical testing and diagnosis.
While the stock has pulled back marginally over the past 52 weeks, it has gained 3.5% over the past six months.
On May 24, Bio-Techne paid its shareholders a quarterly dividend of $0.08 per share. Its annualized dividend of $0.32 translates to a 0.42% dividend yield. Furthermore, it maintains a low payout ratio of 18.69%, channeling the majority of its earnings into growth initiatives.
In terms of valuation, the stock trades at 10.66 times sales, which is lower than its own five-year average of 13.29x.
Following the announcement of its better-than-expected fiscal Q3 earnings results on May 1, Bio-Techne’s shares jumped a notable 16.2%. The company’s net sales of $303.4 million rose 3.2%, surpassing estimates by 3.7%. Its adjusted EPS of $0.48 also topped projections by 5.3%.
During the quarter, cash flow generated from operations rose to $223.5 million, showing a strong 31% annual improvement. Moreover, despite a slight decline in revenue from the Protein Sciences segment, its revenue from the Diagnostics and Genomics segment demonstrated strong growth, rising 16% year over year.
Commenting on the company’s Q3 performance, Kim Kelderman, President and CEO, emphasized Bio-Techne’s diverse portfolio, including bioactive reagents, proteomic analysis, cell & gene therapy, spatial biology, and diagnostics. These products are strategically positioned to advance the company’s scientific research and create sustainable shareholder value.
Analysts tracking Bio-Techne project the company’s profit to reach $1.56 per share in fiscal 2024 and grow 16% to $1.81 per share in fiscal 2025.
Kornitzer Capital’s Carter highlights Bio-Techne as a promising investment due to its leadership in supplying life science equipment and services. Despite challenges like pharmaceutical budget cuts post-COVID-19 and fluctuating venture capital funding, Bio-Techne’s focus on quality over price has helped maintain its market share and appeal to investors seeking resilience in the biopharma sector.
Bio-Techne stock has a consensus “Strong Buy” rating overall. Out of the 14 analysts covering the stock, 11 suggest a “Strong Buy,” and the remaining three give a “Hold” rating.
The average analyst price target of $83.08 indicates a potential upside of just 7.9% from the current price levels. However, the Street-high price target of $95 suggests a potential upside of 23.4%.
Small-Cap Stock #2: Match Group
Based in Texas, Match Group, Inc. (MTCH) has positioned itself as a leader in the dating industry, providing over 45 dating products in multiple languages across numerous countries. Valued at $8.2 billion by market cap, some of its renowned brands include Tinder, Hinge, Match.com, PlentyOfFish, Meetic, and OkCupid. Tinder, the world’s most downloaded and highest-grossing dating app, plays a pivotal role in driving the company’s annual revenue growth.
Shares of this dating giant have slumped 26% over the past 52 weeks and 12.9% on a YTD basis.
Priced at 15 times forward earnings and 2.50 times sales, the stock trades much lower than its own five-year averages of 36.09x and 6.25x, respectively.
On May 7, the company reported its Q1 earnings results, which sailed past Wall Street’s projections on both the top and bottom lines. The company’s revenue of $859.7 million improved 9.2% year over year, while its EPS of $0.44 surged 4.8%, beating Wall Street’s forecast by a solid 10%…
Read More: 3 High-Quality Small-Cap Stocks That Investors Are Overlooking