We recently published a list of 10 Best Small-Cap Value Stocks to Buy Now. In this article, we are going to take a look at where Green Plains Inc. (NASDAQ:GPRE) stands against other best small-cap value stocks to buy now.
Earlier on February 24, Robert Teeter of Silvercrest Asset Management shared his perspective on small-cap stocks and highlighted their link to economic conditions and sensitivity to financing activity. He noted that the Trump trade initially boosted small caps due to expectations of economic acceleration and lower interest rates, both of which are favorable for these companies. However, policy uncertainty and weaker-than-expected economic data have delayed their rally. Teeter believes that small caps will come into their own later in the year, but for now, they are facing a choppy market with significant rotation.
In advising clients, Teeter emphasized the importance of diversification within the S&P 500. He pointed out that the equal-weight benchmark has been performing well this year, and within the tech sector, the average tech stock is outperforming the tech sector as a whole. This suggests that investors are seeking diversification to protect themselves against policy risks. Teeter also highlighted healthcare as an interesting sector and noted that it has faced challenges with profit margins following the pandemic but now seems to have stabilized. He also discussed international markets and observed that they had outperformed US markets at the start of the year. He sees opportunities in these markets due to good valuations and the stabilization of the dollar, which reduces dollar strength and benefits non-US sectors.
Given Teetar’s sentiment, small-cap value stocks might be a good option right now due to their historically strong long-term performance and current undervaluation relative to large-cap stocks. According to Teeter, small caps are expected to recover later this year.
Methodology
We first used the Finviz stock screener to compile a list of small-cap value stocks that were trading between $300 million and $2 billion. We then picked 10 stocks with a forward P/E ratio under 15, that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024.
Note: All data was recorded on March 19.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up of a distiller grains bag, highlighting the company’s ethanol production process.
Green Plains Inc. (NASDAQ:GPRE)
Forward P/E Ratio as of March 19: 9.52
Market Capitalization as of March 19: $342.27 million
Number of Hedge Fund Holders: 29
Green Plains Inc. (NASDAQ:GPRE) produces low-carbon fuels and operates through the Ethanol Production and Agribusiness and Energy Services segments. It produces, stores, and transports ethanol, distiller grains, and renewable corn oil. It also engages in grain procurement, and commodity marketing, and provides essential grain drying and storage services to producers.
The company is repositioning its Ethanol Production segment and shifting from a phase of innovation to a focused commercialization strategy. Despite challenges that resulted in a net loss of $54.9 million in Q4 2024, the Ethanol Production segment achieved $44.7 million in EBITDA for the full year 2024. The company’s ethanol plants operated at a 92% utilization rate during Q4 and are targeting a consistent mid-90s rate in 2025. This excludes the temporarily idled Fairmont facility.
A pivotal initiative for this segment is the implementation of carbon capture technology at its Nebraska plants, which is expected to commence in H2 2025. It’s projected to contribute ~$130 million in annualized financial contribution while utilizing a $70 per ton private carbon credit value. Green Plains Inc. (NASDAQ:GPRE) is increasing corn oil yields, with the potential to produce ~300 million pounds annually. Each 10-cent increase in corn oil value translates to an additional $30 million in EBITDA.
Green Plains Inc. (NASDAQ:GPRE) shareholders are poised for significant gains through a near-term company sale, driven by activist pressure and favorable market conditions. White Brook Capital Partners stated the following regarding the company in its Q3 2024 investor letter:
“Green Plains Inc. (NASDAQ:GPRE) management and board continue to find themselves under activist scrutiny with long-term shareholders consolidating around a sale of the company. A small but underappreciated debt instrument that prohibited the company’s sale was paid down on October 1st and so the review process and consideration by potential acquirers that should have begun during the 1st quarter, can now lead to actionable behavior. As it stands, management and the board are staring at an embarrassing proxy contest they will overwhelmingly lose in early 2025 if they don’t sell the Company in the fourth quarter or early in the first. As collaborating evidence, an industry comparable transaction occurred during the third quarter that supports shareholder contention that a significantly higher stock price can be achieved through the company’s sale, in whole or in parts. We expect movement in the short term.”
Overall, GPRE ranks 5th on our list of best small-cap value stocks to buy now. While we acknowledge the growth potential of GPRE, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GPRE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.