Exploring undervalued small caps with insider action in July 2024

While global markets are going through a relatively quiet period, small-cap stocks in the U.S. have shown remarkable resilience and outperformance, especially as investors adjust their positions ahead of major index reshuffles. This backdrop provides an interesting way for investors to explore potential opportunities in undervalued small-cap stocks that may be poised for growth amidst this momentum. In this context, a good stock can be characterized by solid fundamentals, insider buying that can indicate confidence in the company’s prospects by those who know it best, and valuation metrics that suggest the stock is trading below its intrinsic value.

Top 10 undervalued small caps with insider purchases

Click here to see the full list of 228 stocks from our Undervalued Small Caps with Insider Buying screener.

Let’s go through some notable picks from our reviewed stocks.

Simply Wall St Value Rating: ★★★★★☆

Overview: Semen Indonesia is a company primarily engaged in the production of cement and non-cement products and has a market capitalization of approximately IDR 34.11 billion.

Operations: Cement production and non-cement production are SMGR’s main revenue contributors, generating IDR 34.11 billion and IDR 13.13 billion respectively. The company achieved a gross profit margin of 0.26% in the last reporting period in 2024, reflecting its cost management relative to revenue.

SPORTS: 12.7x

Recently, PT Semen Indonesia (Persero) Tbk recorded a decline in quarterly revenue and net profit as reported on May 10, 2024. Revenue fell to IDR 8.38 billion year-on-year from IDR 8.94 billion and net profit fell to IDR 472 million from IDR 562 million. Despite these challenges, forecasters project earnings growth of about 13.5% annually. Significantly, the company maintains a unique financing structure with no customer deposits and full reliance on external loans – which is considered higher risk but can be potentially rewarding for sophisticated investors looking for growth in lesser-known markets. At the recent Macquarie Asia Conference, they highlighted strategic initiatives aimed at capitalizing on emerging market momentum. In addition, insider confidence is reflected in recent stock purchases by executives who are betting on the company’s strategy and future prospects.

Simply Wall St Value Rating: ★★★★☆☆

Overview: Ramaco Resources is a company focused on the production and sale of metallurgical coal, primarily serving the metals and mining sector. Its market capitalization is approximately $699.84 million.

Operations: The company generates revenue from coal mining. Recent figures show revenue of $699.84 million. Gross profit margins have been on an upward trend, reaching 0.25 in the last period, indicating increasing efficiency in managing production costs relative to revenue.

SPORTS: 13.2x

Ramaco Resources, a company deeply rooted in the mining sector, has recently demonstrated its adaptability and growth potential with strategic leadership changes and an expanded credit facility. Despite a decline in profit margins from 17.3% to 8% over the past year, insider confidence remains robust, as demonstrated by recent share purchases by executives. This action underscores their belief in the company’s prospects amid operational expansions and financial restructuring aimed at strengthening future performance.

Simply Wall St Value Rating: ★★★☆☆☆

Overview: Kinetic Development Group is a real estate development and management company with a market capitalization of approximately 1.23 billion Canadian yen.

Operations: The company significantly increased its gross profit margin from 9.05% in September 2013 to 59.07% in July 2024, due to improved operating efficiency and better cost management. During the same period, revenue increased from CN¥102.90 million to CN¥4745.07 million, indicating significant expansion and increased market presence.

SPORTS: 4.3x

Against a backdrop of improvements in corporate governance and dividend adjustments, Kinetic Development Group has demonstrated remarkable insider confidence with recent share purchases by executives. This measure, coupled with a purely external lending structure – with no customer deposits – indicates a bold strategic direction despite the associated risks. With the next earnings expected on May 31, 2024, the company’s willingness to overcome future challenges while seizing opportunities is palpable.

The central theses

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This Simply Wall St article is of a general nature. We comment solely on historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

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