3 Beaten-Down Small-Cap Stocks to Buy on Fire Sale
These three beaten-down small-cap stocks are “buys” now as they have been on sale in 2022.
Riley Financial (RILY): With a dividend yield of 7.7% and robust sales growth, this stock is too attractive to ignore.
Camping World Holdings (CWH): This is a value stock with a high dividend yield of more than 8%.
IDT Corporation (IDT): Strong net income and EBITDA growth over the past two consecutive years bodes well for IDT stock.
Source: iQoncept / Shutterstock
One of the best times to buy stocks is when they are selling at a discount after a steep selloff, like the recent one in the U.S. stock market. I have chosen three beaten-down small-cap stocks to buy in light of this. Two out of these three stocks have high dividend yields of more than 7.5%. The third stock has witnessed two consecutive years of strong fundamentals, so there is a story that makes these stocks appealing other than their depressed prices.
Small-cap stocks often tend to move in a more volatile way compared to other large-cap stocks. Additionally, if a rebound in the broader stock market is to occur and gain strength, then these three small-cap stocks could perform well. Notably, the following stocks come from different sectors and industries, which is very important for a diverse portfolio.
The Russell 2000 Index that tracks small-cap stocks has losses of nearly 20% in 2022, indicating that small-cap stocks have followed the same trend as major U.S. stock market indexes. This signals that there is plenty of upside potential for small-cap stocks, especially the three on today’s list.
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Here are my top three small-cap stocks to buy:
Small-cap Stocks to Buy: B. Riley Financial (RILY)
Source: Pavel Kapysh / Shutterstock.com
Sector: Financial Services
Industry: Financial Conglomerates
B. Riley Financial (NASDAQ:RILY) is a financial firm founded in 1973. It serves clients in North America, Australia, and Europe and operates in six segments: Capital Markets, Wealth Management, Auction and Liquidation, Financial Consulting, Principal Investments Communications, and Brands.
RILY stock has losses of nearly 44% in 2022 and a price-to-earnings (P/E) ratio trailing twelve months (TTM) of only 3.28. Other than the low P/E, the stock has a forward dividend and yield of 4 and 7.7%, respectively.
The company has reported solid sales growth over the past four consecutive years. In 2018, 2019, 2020 and 2021 revenue growth was 31.29%, 54.17%, 41.81% and 87.13%, respectively.
Strong sales growth without equally robust net income growth is problematic for a company. B. Riley Financial has delivered net income growth that is impressive for the period of 2019 to 2021. Net income of $81.61 million in 2019 grew to a net income of $445.05 million in 2021. Based on these statistics, RILY stock could be a good small-cap stock for your portfolio.
Camping World Holdings (CWH)
Source: Casimiro PT / Shutterstock
Sector: Consumer Cyclical
Industry: Auto & Truck Dealerships
Camping World Holdings (NYSE:CWH) was founded in 1966 and is a retailer of recreational vehicles (RVs) and related products and services. The company operates in two segments: Good Sam Services and Plans and RV and Outdoor Retail. It would be hard for shares of Camping World Holdings to avoid the selloff in 2022, so it is no surprise that it is down 27.6% in 2022. This decline presents an opportunity now.
First, CWH stock has a P/E Ratio (TTM) of 4.63, making it very cheap. Second, the forward dividend and yield of $2.50 and 8.63%, respectively, makes the argument for investing in this beaten-down small-cap stock a strong one. It could potentially generate passive income and boost the total financial return during a stock price rally.
The one-year target of $34.88 signals an upside potential of nearly 15%. Add in the dividend earned, and the total return will increase to more than 20% should this forecast come to fruition.
Its sales growth has gained momentum in 2020 and 2021, rising to 11.34% and 26.94%, respectively. Additionally, net income growth soared in 2021. The company reported a net income of $278.46 million, which is an increase of 127.6%. CWH stock could be a good small-cap investment for your portfolio.
Small-cap Stocks to Buy: IDT Corporation (IDT)
Source: Shutterstock
Sector: Communication Services
Industry: Telecom Services
IDT Corporation (NYSE:IDT) was founded in 1990 and operates through three segments: Fintech, net2phone-Unified Communications as a Service (UCaaS), and Traditional Communications. It is the only stock in this list of beaten-down small-cap stocks to buy that does not offer a dividend.
IDT stock is down 40.9% in 2022 and has a P/E Ratio (TTM) of 8.62.
Its sales growth is not spectacular, but is relatively stable with sales in the range of $1.35 billion to $1.55 billion for the period of 2018 to 2021. What makes this stock interesting is its explosive net income and EBITDA growth for the last two consecutive years.
In 2020, net income reported was $21.43 million, an increase of 15,892.54%. In 2021, net income growth was lower, but still impressive. The firm reported a net income of $96.48 million, an increase of 350.19%.
EBITDA has been getting stronger, as well. This is very positive for valuation purposes. In 2020, EBITDA of $44.7 million showed an increase of 96.13%. In 2021, EBITDA grew 66.38% to $74.38 million. All in all, IDT stock could be a good small-cap stock to add to your portfolio.
On the date of publication, Stavros Georgiadis, CFA did not have (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.
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