12 Cheap Small-Cap Stocks to Consider as Market Leaders Emerge

As the market continues to evolve, small-cap stocks are starting to gain traction and look like potential market leaders. These stocks, with market capitalizations typically between $250 million and $2 billion, offer unique advantages and growth potential. In this article, we've screened for the 12 cheapest small-cap stocks in the S&P SmallCap 600 index that have the highest long-term growth potential, based on analyst estimates. To find these stocks, we picked the 20 small-cap stocks in the S&P SmallCap 600 index that will have the highest average long-term growth in per-share earnings, according to analyst estimates on FactSet. Then, we selected the 12 of those stocks that are trading at the lowest multiple of earnings expected over the next 12 months, also per FactSet. This screen has identified promising small-cap stocks that are well-positioned for growth and offer attractive valuations.

1. Lithium Americas (Argentina) (LAAC)
- LAAC is a pure-play lithium producer with a focus on Argentina, a region rich in lithium resources. The company's first project entered production late last year, and it is well-positioned to benefit from the expected rebound in lithium prices in 2024. Morningstar analyst Seth Goldstein expects lithium prices to rise in 2025, spurred by cuts in supply, which should send shares closer to our fair value estimates.
- Price/Fair Value: 0.18
- Morningstar Uncertainty Rating: Very High
- Morningstar Economic Moat Rating: Narrow
- Morningstar Capital Allocation Rating: Standard
- Industry: Other Industrial Metals & Mining

2. Hanesbrands (HBI)
- HBI is a market leader in basic innerwear, with strong brand recognition and a dominant position in replenishment apparel categories. The company's focus on reducing debt and improving margins should help it maintain its market share. Morningstar senior analyst David Swartz believes HBI's share leadership in replenishment apparel categories positions it for improving results in 2024.
- Price/Fair Value: 0.46
- Morningstar Uncertainty Rating: Very High
- Morningstar Economic Moat Rating: Narrow
- Morningstar Capital Allocation Rating: Standard
- Industry: Apparel Manufacturing

3. VF Corp (VFC)
- VFC is a portfolio of popular brands, including Vans, The North Face, and Timberland, which provide a diverse revenue stream. The company's turnaround plan aims to cut costs, reduce debt, and improve operational efficiency, further strengthening its market position. Morningstar's David Swartz believes VFC will grow earnings per share (EPS) by 10% annually over the next five years, validating the company's strategic decisions.
- Price/Fair Value: 0.51
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Morningstar Capital Allocation Rating: Standard
- Industry: Apparel Manufacturing

4. Arcadium Lithium (ALTM)
- ALTM is focused on lithium exploration and development, positioning it to capitalize on the growing demand for electric vehicles and energy storage systems. The company's strategic partnerships with major automakers and battery producers reflect its ability to capitalize on opportunities in the lithium market.
- Price/Fair Value: 0.25
- Morningstar Uncertainty Rating: Very High
- Morningstar Economic Moat Rating: Narrow
- Morningstar Capital Allocation Rating: Standard
- Industry: Other Industrial Metals & Mining

5. Nordstrom (JWN)
- JWN is focused on omnichannel retailing and digital transformation, positioning it to capitalize on evolving consumer trends. The company's strategic investments in its supply chain and inventory management systems reflect its ability to manage risks and improve operational efficiency.
- Price/Fair Value: 0.42
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Morningstar Capital Allocation Rating: Standard
- Industry: Department Stores

6. Adient (ADNT)
- ADNT is the leader in the automotive seating market, with just one significant global competitor, reflecting its ability to maintain a competitive advantage. The company's strategic focus on cost reduction and operational improvement positions it to capitalize on opportunities in the automotive industry.
- Price/Fair Value: 0.33
- Morningstar Uncertainty Rating: Very High
- Morningstar Economic Moat Rating: Narrow
- Morningstar Capital Allocation Rating: Standard
- Industry: Auto Parts

7. Sabre Corp (SABR)
- SABR is focused on travel technology and data analytics, positioning it to capitalize on the growing demand for digital travel services. The company's strategic investments in research and development reflect its ability to innovate and adapt to market trends.
- Price/Fair Value: 0.48
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Morningstar Capital Allocation Rating: Standard
- Industry: Travel Services

8. Lyft (LYFT)
- LYFT is focused on ride-sharing and autonomous vehicle technology, positioning it to capitalize on the growing demand for mobility services. The company's strategic partnerships with automakers and technology companies reflect its ability to capitalize on opportunities in the mobility market.
- Price/Fair Value: 0.22
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Morningstar Capital Allocation Rating: High
- Industry: Specialized Consumer Services

9. Compass Minerals International (CMP)
- CMP is focused on mineral and salt products, positioning it to capitalize on the growing demand for essential minerals and chemicals. The company's strategic investments in its mining and processing operations reflect its ability to manage risks and improve operational efficiency.
- Price/Fair Value: 0.38
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Morningstar Capital Allocation Rating: Standard
- Industry: Diversified Chemicals

10. FMC Corp (FMC)
* FMC is focused on agricultural solutions and specialty chemicals, positioning it to capitalize on the growing demand for food and chemical products. The company's strategic investments in research and development reflect its ability to innovate and adapt to market trends.
* Price/Fair Value: 0.44
* Morningstar Uncertainty Rating: High
* Morningstar Economic Moat Rating: Narrow
* Morningstar Capital Allocation Rating: Standard
* Industry: Diversified Chemicals

11. GeneDx (WGS)
* GeneDx is a leader in genomic diagnostics, with a strong focus on advanced diagnostic services. The company's expansion into higher-margin testing and strong revenue growth position it well for future growth. GeneDx's effective monetization of proprietary genetic data assets and ability to capture a larger share of the genomic testing market reflect its strong financial discipline.
* Price/Fair Value: 0.18
* Morningstar Uncertainty Rating: Very High
* Morningstar Economic Moat Rating: Narrow
* Morningstar Capital Allocation Rating: Standard
* Industry: Biotechnology

12. NewLake Capital Partners (NLCP)
* NewLake is a leader in cannabis real estate, with a strong focus on strategic investments and value creation. The company's solid increase in adjusted funds from operations (AFFO) and high and growing dividend yield reflect its financial stability and confidence in future cash flows from the portfolio. NewLake's low leverage profile and attractive interest rates on its credit facility position it favorably to capitalize on growth opportunities in the cannabis real estate sector.
* Price/Fair Value: 0.33
* Morningstar Uncertainty Rating: Very High
* Morningstar Economic Moat Rating: Narrow
* Morningstar Capital Allocation Rating: Standard
* Industry: Real Estate Investment Trusts (REITs)

These 12 small-cap stocks offer attractive valuations and strong growth potential, making them well-positioned to capitalize on emerging market trends and opportunities. As the market continues to evolve, these stocks may become market leaders, providing investors with significant upside potential.