Micro-cap stocks have the potential for rapid growth, particularly if they belong to high-growth industries or possess disruptive business models. This can lead to significant gains for investors who can identify and invest in promising micro-cap stocks.

Therefore, investors could consider buying fundamentally sound micro-cap stocks, LifeVantage Corporation (LFVN), Pro-Dex, Inc. (PDEX), and Lee Enterprises, Incorporated (LEE).

Micro-cap stocks have a market capitalization that lies approximately between $50 million and $300 million. These stocks emphasize long-term growth and operate with high efficiency, concentrating on expanding their businesses. Therefore, when chosen wisely, micro-caps can be highly beneficial for investors.

Moreover, micro-cap stocks can offer substantial returns, but high-quality ones often go unnoticed due to the limited media coverage they receive compared to large companies. Despite this, they have a history of outperformance. A Boston Partners report shows that from early 1995 to June 2020, the CRSP Equal Weighted Microcap Index grew by 740%, surpassing the S&P 500’s 255% returns.

Considering these encouraging trends, let’s take a look at the fundamentals of the three best micro-cap stocks.

LifeVantage Corporation (LFVN)

LFVN engages in identifying, researching, developing, formulating, selling, and distributing nutrigenomic activators, dietary supplements, nootropics, pre- and pro-biotics, weight management, skin and hair care products, bath and body, and targeted relief products. It has a market cap of $80.20 million.

On May 2, 2024, the company paid its shareholders a quarterly dividend of $0.04 per share. The company pays an annual dividend of $0.16, which translates to a 2.47% yield with a four-year average yield of 2.51%.

In terms of forward non-GAAP P/E, LFVN is trading at 9.95x, 42.4% lower than the industry average of 17.29x. Likewise, the stock’s forward EV/Sales and Price/Sales multiples of 0.39 and 0.41 are 78% and 68.9% lower than their respective industry averages of 1.76 and 1.31.

In the third quarter, which ended March 31, 2023, LFVN reported revenue and gross profit of $48.25 million and $38.07 million, respectively. The company’s non-GAAP net income and adjusted EPS amounted to $2.78 million and $0.21, up 169.9% and 162.5% year-over-year, respectively.

For the fiscal first quarter ending September 2024, LFVN’s revenue is expected to amount to $49.63 million, while its EPS is forecasted to settle at $0.16. Further, its EPS and revenue are expected to rise 7.7% and 1.8% year-over-year to $0.70 and $205.84 million, respectively, in the fiscal year ending June 2025. Moreover, it topped the consensus EPS estimates in three of the trailing four quarters.

Over the past year, the stock has gained 44.5% to close the last trading session at $6.47.

LFVN’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

LFVN has an A grade for Value, Sentiment, and Quality. The stock is ranked #2 out of 10 stocks within the A-rated Medical – Consumer Goods industry.

To see the other ratings of LFVN for Growth, Momentum, and Stability, click here.

Pro-Dex, Inc. (PDEX)

By market cap, PDEX is valued at $65.13 million. It designs, develops, manufactures, and sells powered surgical instruments for medical device original equipment manufacturers worldwide.

In terms of forward EV/EBITDA, PDEX is trading at 8.35x, 39.1% lower than the industry average of 13.70x. Likewise, the stock’s forward EV/Sales and Price/Sales multiples of 1.40 and 1.32 are 61.4% and 65.8% lower than their respective industry averages of 3.63 and 3.86.

In the third quarter that ended March 31, 2024, PDEX’s net sales increased 3.9% year-over-year to $14.29 million, and its gross profit grew 5% year-over-year to $4 million. The company’s net income and net income per share amounted to $ 655 thousand and $0.19, respectively.

Analysts expect PDEX’s revenue for the quarter ending December 2024 to increase marginally year-over-year to $12.70 million. Its EPS for the same period is expected to increase 128.6% year-over-year to $0.32. Moreover, it topped the consensus revenue estimates in three of the trailing four quarters.

Shares of PDEX have surged 12.3% over the past nine months to close the last trading session at $19.05.

PDEX’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

PDEX has a B grade for Quality, Stability, Sentiment, and Value. It is ranked #3 out of 77 stocks in the A-rated Industrial – Machinery industry.

In addition to the POWR Ratings highlighted above, you can check PDEX’s ratings for Momentum and Growth here.

Lee Enterprises, Incorporated (LEE)

Valued at $62.48 million by market cap, LEE provides local news and information, and advertising services in the United States. The company offers digital subscription platforms; daily, weekly, and monthly newspapers and niche publications; and web hosting and content management services.

LEE’s forward EV/Sales and Price/Sales multiples of 0.86 and 0.10 are 55.4% and 92.1% lower than their respective industry averages of 1.93 and 1.25.

LEE’s total operating revenue was reported at $146.55 million for the third quarter that ended March 24, 2024, and digital subscription revenue grew 44.8% year-over-year to $20.26 million. The company’s adjusted EBITDA increased 5.2% from the year-ago value to $15.06 million.

Analysts expect LEE’s EPS to grow 172% year-over-year to $0.68 for the quarter ended June 2024. Its revenue is expected to be $165.48 million. Also, the company has topped the consensus revenue estimates in three of the four trailing quarters, which is remarkable.

LEE’s stock has gained 29.2% year-to-date to close the last trading session at $10.17.

LEE’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. 

LEE has a B grade for Growth, Sentiment, and Value. Within the A-rated Entertainment – Publishing industry, it is ranked first out of eight stocks.

To see LEE’s additional ratings for Momentum, Stability, and Quality, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

LFVN shares were trading at $6.58 per share on Tuesday afternoon, up $0.11 (+1.70%). Year-to-date, LFVN has gained 10.80%, versus a 17.43% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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