A small-cap stock is a security whose market capitalization ranges between $250 million and $2 billion. Small-cap stocks are often companies that are relatively small and focused on a niche business. Chances are investors have never heard of many of the players in the small-cap space. This is a shame as there are many promising small-cap stocks that are great investments, regularly beating the market and outperforming the shares of much larger and better known companies.
Finding a solid small-cap stock can be like finding a diamond in the rough as they can provide years of gains to investors as the company grows and matures. Here are three underrated small-cap stocks you can’t ignore now. These are companies that have each outperformed the market by a wide margin so far in 2023.
Eastman Kodak (KODK)
Remember Eastman Kodak (NYSE:KODK)? The once mighty company whose name was synonymous with photography has fallen on hard times since smartphones started to come equipped with high resolution cameras. As a result, Eastman Kodak’s stock has fallen on hard times too. Today, the publicly traded company has a market capitalization of only $400 million. However, the company, which has been going since 1888, looks to be staging a huge comeback and is definitely among the must-watch small-cap stocks on the stock market.
Year-to-date, KODK stock is up 65% and enjoying its best rally in years. Institutional investors, as well as board directors of the company, have been buying up shares since last fall. Investors appear to be increasingly impressed by the company’s successful transition away from film photography and to a new focus on commercial print and chemicals. Eastman Kodak has also reported seven consecutive quarters of revenue growth, which is also inspiring confidence in the company and its future.
Allied Motion Technologies (AMOT)
Unlike Eastman Kodak, most investors have probably never heard of Allied Motion Technologies (NASDAQ:AMOT). Its a relatively small company that designs and manufactures precision and specialty parts for use in the automobile, medical, aerospace and defense industries. The company’s market capitalization currently sits at $625 million, placing it firmly in the underrated small-cap stocks category. However, the company does pay a dividend to shareholders of 3 cents a share, which equates to a yield of 0.32%.
The dividend is not the real reason to buy AMOT stock though. The performance of the shares is the real attraction here. Over the last 12 months, Allied Motion’s stock has risen 63%, outperforming both the broader stock market and most mega-cap technology companies. Through five years, AMOT stock is now up 20%. The stock has been running hot ever since the company posted record revenue of $145.5 million in this year’s first quarter, up 27% from a year earlier. This was just the latest in a string of strong earnings prints from Allied Motion.
Rocket Pharmaceuticals (RCKT)
As of this writing, Rocket Pharmaceuticals (NASDAQ:RCKT) stock has increased over 110% over the last 12 months, including a 20% gain so far this year. With a market cap of $1.8 billion, the stock remains in the small-cap category, but likely not for long. The company, which specializes in gene therapy medications, has seen its stock rise on positive developments related to several treatments it has before the U.S. Food and Drug Administration (FDA) for approval.
RCKT stock moved a leg higher recently on news that a gene therapy it is developing to treat a rare heart disorder has been put on a fast track authorization path by the FDA. Analysts like the company’s focus on gene therapies to treat a wide range of disease and also like the company’s pipeline of pharmaceutical products. Many catalysts for the stock are expected ahead. Over the last five years, the stock is only up 5%. However, the conditions now seem right for this small pharmaceutical company’s stock to continue its growth trajectory.
On the date of publication, Joel Baglole 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.