7 Best Small-Cap Value Stocks to Buy According to Hedge Funds

4. Elanco Animal Health Incorporated (NYSE:ELAN)

Market Cap: $7.26 billion 

Forward P/E: 15.98

EPS Growth This Year: 3.40%

Number of Hedge Fund Holders: 44

Elanco Animal Health Incorporated (NYSE:ELAN) is an animal health company specializing in delivering services and products that prevent and treat disease in pets and farm animals. Its diverse portfolio serves animals across various species, primarily cats, dogs, cattle, swine, poultry, and sheep.

The company’s product offerings are divided into two categories: Farm Animal and Pet Health. The Pet Health portfolio specializes in parasiticides, therapeutics, and vaccines. It also offers products that grant protection from ticks, fleas, and internal parasites. Some of its products in the category include Credelio Family, Milbemax, Drontal Family, Galliprant, Trifexis, Milbemax, and others. The Farm Animal portfolio focuses on swine, cattle, and poultry, and includes an elaborate list of products. Some of these include Denagard, Baycox, Experior, Rumensin, Monteban, Baycox, Maxiban, Comforta, Catosal, and others.

The company is running on strong financials and delivered solid Q2 2024 earnings that exceeded the top end of its guidance range on key metrics. These include revenue, adjusted EPS, and adjusted EBITDA. It is operating on four consecutive quarters of revenue growth, and is continuing to make substantial progress on its three strategic outcomes: growing revenue, improving cash flow, and delivering innovation. It has delivered consistent operational results since Q1, achieving key milestones in advancing its portfolio, innovation, and productivity strategy. This growth is primarily driven by strength in international pet health, US farm animals, and additional contributions from new products.

Elanco Animal Health Incorporated (NYSE:ELAN) repaid $1.3 billion of debt in 2024 with improved cash flow and proceeds from the sale of its Aqua business. The company expects net leverage to be in the mid-4x level by the end of 2024. It holds a positive full-year outlook, with organic constant currency revenue growth expected to stand at 3%- 4% for the full year. Such initiatives position the company at a strategic level relative to its market position, giving it the ability to grow its business in key areas of strength.