We recently published a list of 12 Best Performing Cheap Stocks in 2024. In this article, we are going to take a look at where CompoSecure, Inc. (NASDAQ:CMPO) stands against other best performing cheap stocks in 2024.
As we step into the final quarter of 2024, the financial markets continue to navigate a complex terrain shaped by a mix of optimism and uncertainty. The latest jobs report for September came in stronger than expected, signaling resilience in the U.S. labor market and leading many investors to reassess their expectations regarding the Federal Reserve’s monetary policy. This report has led traders to largely eliminate the possibility of a more significant rate cut, now forecasting an 87% chance of a quarter-point reduction in the near future. Despite these concerns, analysts are generally optimistic about the broader market’s prospects as we head towards year-end, thanks to promising earnings growth and stabilizing economic indicators.
Goldman Sachs, one of the leading voices on Wall Street, recently revised its target for a major stock market index upward, projecting that the index will reach 6,000 by the end of 2024. This forecast implies a 4.3% upside from current levels and reflects the bank’s confidence in sustained earnings growth throughout the remainder of the year. The bank also sees a longer-term target of 6,300 for the index, which would represent a 9.5% gain over the next 12 months. Chief U.S. equity strategist David Kostin noted that despite near-term volatility, factors like a recovery in the semiconductor cycle and easing cost pressures are likely to boost margins across multiple sectors. Such bullish sentiment suggests that investors looking for value opportunities might find them in underperforming but fundamentally sound sectors.
One area that stands out in terms of valuations and future potential is the biopharmaceutical industry. Experts like Karen Firestone, a seasoned investor and regular contributor to CNBC, highlight that despite the sector’s recent struggles, it presents an attractive entry point for long-term investors. Large pharmaceutical companies are trading at lower price-to-earnings ratios compared to the broader market, offering robust profit margins and potential for AI-driven breakthroughs in drug development. While some big names have rallied on the back of their blockbuster obesity drugs, the broader biopharma sector remains relatively undervalued.
This favorable setup is not confined to biopharma alone. The technology and consumer discretionary sectors, which were hit hard earlier this year, are also starting to show signs of life. According to FactSet, analysts expect the major stock index to post its fifth consecutive quarter of earnings growth in the third quarter, projecting a 4.2% expansion year-over-year. This suggests that sectors with solid growth fundamentals could outperform as economic conditions stabilize. At the same time, energy stocks, particularly those within the communication services sector, have received a higher percentage of “buy” ratings, reflecting optimism around their capacity to deliver gains in the coming months.
While there’s a lot of chatter around high-growth sectors, value investors are eyeing cheap stocks that have managed to deliver impressive returns. The biopharmaceutical sector is a case in point, where low valuations, high margins, and the potential integration of AI into drug discovery make it a compelling area for investment. Analysts suggest that companies with robust balance sheets and pricing power are best positioned to withstand potential economic headwinds and capitalize on emerging growth opportunities.
In addition, some strategists believe that broader market gains could extend beyond 2024, particularly if the Federal Reserve manages to engineer a “soft landing” by controlling inflation without triggering a recession. With the presidential election looming in 2025, historical data shows that major stock indices tend to perform well during election years, further supporting a cautiously optimistic outlook for equities.
Given these dynamics, it’s evident that while the market landscape is marked by volatility and economic uncertainties, there are still promising opportunities to be found. In the following sections, we delve into 12 of the best-performing cheap stocks of 2024, which have outpaced broader market indices and offer attractive entry points for investors looking to navigate these uncertain times with a focus on long-term gains.
Our Methodology
For this article, we used Finviz stock screener to look for companies having forward Price to Earnings (P/E) ratio of less than 15. We then selected the top 12 stocks with the best year-to-date performance. Additionally, we reviewed data from approximately 912 elite hedge funds tracked by Insider Monkey during the second quarter of 2024 to determine hedge fund ownership for each company. The stocks are ranked in ascending order of their year-to-date performance.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close up of a metal composite product, emphasizing its strength in design.
CompoSecure, Inc. (NASDAQ:CMPO)
Number of Hedge Fund Holders: 20
Year to date Share Price Gain: 170.19%
Forward Price to Earnings (P/E) Ratio: 11.12
CompoSecure, Inc. (NASDAQ:CMPO) is a leading provider of premium financial technology and payment solutions. It manufactures and designs metal, composite, and proprietary financial transaction cards in the United States and internationally. In the second quarter of 2024, CompoSecure, Inc. (NASDAQ:CMPO) exceeded market expectations by posting an EPS of $0.27, surpassing the consensus estimate of $0.26. This performance, coupled with record revenue and EBITDA growth, highlights the stock’s resilience and upside potential in the financial technology sector.
The company reported record net sales of $108.6 million, reflecting a 10% year-over-year increase, driven by continued growth in domestic markets and robust international demand. Additionally, CompoSecure, Inc. (NASDAQ:CMPO) adjusted EBITDA rose by 8% to $40 million during the same period. These results indicate the company’s ability to scale its business effectively while maintaining healthy margins. Despite inflationary pressures impacting gross margins, CompoSecure has managed to sustain an adjusted EBITDA margin of 36.8%, demonstrating strong operational efficiency.
Moreover, CompoSecure has strategically positioned itself for future growth through key partnerships and product innovations. The company expanded its collaboration with Fiserv to market and resell Arculus Authenticate, a secure authentication solution targeting financial institutions and fintechs. This partnership enhances CompoSecure, Inc. (NASDAQ:CMPO) product portfolio and is expected to contribute significantly to revenue growth in the coming quarters.
The company’s balance sheet remains solid, with cash and cash equivalents of $35.4 million and a total debt of $330.9 million as of June 30, 2024. The recent amendment and extension of its credit facility with favorable terms underscore lender confidence in CompoSecure, Inc. (NASDAQ:CMPO) financial stability and growth prospects. The company’s leverage ratio has improved to 2.2x, reflecting successful debt reduction and increased trailing 12-month adjusted EBITDA of $150.4 million.
CompoSecure, Inc. (NASDAQ:CMPO) leadership is further strengthened by the involvement of industry veteran Dave Cote, former CEO of Honeywell, who will take on the role of Executive Chairman. His extensive experience and proven track record in driving shareholder value position CompoSecure, Inc. (NASDAQ:CMPO) for continued success. With these fundamentals in place, CompoSecure stands out as a top-performing stock with significant upside potential in 2024.
Overall, CMPO ranks 6th on our list of best performing cheap stocks in 2024. While we acknowledge the potential of CMPO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CMPO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
