Essentially, investors are all after the same thing: strong returns. While you can't argue with putting your cash to work behind the stock market's stalwarts, which time and again has proven to be a successful investing strategy, if you're after some serious upside, further down the stock food chain is where the real gains are made.
Of course, the further afield you wander from the mainstream, the risker the investment becomes, but that is the nature of the beast. Playing it safe is one game plan but for those willing to shoulder the risk, small caps potentially offer the greater reward. Potentially, however, is the key word here, as the trick is to find the names where the risk is worth taking on.
With this in mind, we delved into the TipRanks database and homed in on two names which offer investors plenty of reasons to get behind. Both are rated as Strong Buys by the analyst consensus, and are trading for under $10 a piece, providing a low entry point with the prospect of robust growth ahead. Let's take a closer look.
Airspan Networks (MIMO)
We'll start off with a fresh new player in the public markets, Airspan Networks. Airspan provides 5G networks with what it terms "groundbreaking, disruptive" software and hardware. The Boca Raton, Florida, based company is also a pioneer in end-to-end Open RAN solutions which allow for integration of its systems with other vendors. The company's portfolio of indoor and outdoor products has global reach, with one million cells having made their way to 1,000 customers in over 100 countries.
Airspan has been on the public markets for only a month following its SPAC merger with New Beginnings Acquisition Corp. 7,500,000 shares of NBA common stock were offered at a price of $10.00 per share. The shares began trading on August 16 and have befallen the fate of many SPACs in 2021, heading south by 16%.
Airspan followed up its SPAC merger with its first quarterly financial report as a public company, for 2Q21. Revenue increased by 51.3% year-over-year to $42.05 million, while the company notched gross profit of $19.2 million, a 31% increase on the same period last year. That said, Airspan still reported a net loss of $10.4 million, a slight improvement on the $11.1 million loss in Q2 2020.
Much has been made of the coming 5G industrial revolution which is still in the early stages with 5G set to be utilized across multiple applications over the next several years. Being the only North American vendor with "proven indoor and outdoor 5G systems," is a big selling point for Barrington analyst Christopher Howe.
"As the only North American integrated 5G network access provider, Airspan is well positioned to benefit from multiple government programs," the 5-star analyst noted. "As we consider the trends that are in favor of Airspan, such as the growing government programs combined with the company's disruptive and innovative technology, we believe there is a valuation gap to be recognized when considering its public comparable companies."
As such, Howe rates MIMO stock an Outperform (i.e. Buy) and has a $15 price target for the shares. Should the target be met, investors are looking at strong gains of ~95%. (To watch Howe's track record, click here)
Overall, Airspan's Strong Buy consensus rating is based on a unanimous 3 Buys. Big gains are projected here, too; over the next 12 months, shares are expected to add 120% of muscle, given the average price target currently stands at $17. (See Airspan stock analysis on TipRanks)
Commercial Vehicle Group (CVGI)
No prizes for guessing what field the last name on our list operates in. Commercial Vehicle Group develops, manufactures, and supplies all manner of equipment to the global vehicle market as well as to the military and for general industrial purposes. These offerings include seating systems, electric vehicle assemblies, electrical wire harnesses, plastic products, and complex automated and robotic assemblies, amongst others.
With 7,200 worldwide employees, this is a big company with a small market cap of just $300 million. That valuation, however, should more than double over the next 12 months, according to Colliers analyst Richard Ryan.
For one, Ryan notes the company's growth initiatives "are performing to the upside." The past 18 months have witnessed 217 new wins, counting 77 new products from 27 new customers. Around 94% of the new awards were generated beyond CVGI's legacy diesel business, with wins from Warehouse Automation, Electric Vehicle and Recreation/Specialty vehicles.
Secondly, the analyst is impressed by the company's latest quarterly display. In Q2, both the top-and bottom-line results beat Street expectations. Revenue beat the forecasts by $10.71 million, increasing by 103.2% year-over-year to $257.9 million. At $0.33, adjusted EPS beat the consensus estimate by $0.05.
Lastly, Ryan calls the valuation somewhat of a 'head scratcher.'
"The current peer-group valuations are in the ~10x range (forward estimates) on an EV/EBITDA basis, CVGI's valuation is below comps by a sizable amount as we do not believe the company is being credited for its strategic transitioning from a niche, cyclical play, to a diversified secular growth story," the analyst explained. "We believe there is room for multiple and EBITDA expansion over the next several years, yielding further upside opportunities."
Unsurprisingly, Ryan rates CVGI a Buy, while his $20.50 price target suggests 12-month gains of ~123%. (To watch Ryan's track record, click here)
Turning now to the rest of the Street, where there is no deviation here from a Strong Buy consensus rating based on a total of 3 Buys. Neither is there much of a change on the projected gains front. The $18.17 average price target implies shares are set to almost double in value over the one-year timeframe. (See CVGI stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a newly launched tool that unites all of TipRanks' equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.