We recently published a list of 8 Most Undervalued Penny Stocks To Buy According To Analysts. In this article, we are going to take a look at where Lantronix, Inc. (NASDAQ:LTRX) stands against other most undervalued penny stocks according to analysts.
What Does the Stock Market Look Like for Small Cap Stocks?
Analysts have been bullish on small-cap stocks and their potential to outperform large caps in a slowing economy. However, the current environment is presenting some choppiness due to elections being just around the corner, thereby demanding some caution from investors.
To talk about what the stock market looks like today and in the near future. Tom Lee, co-founder of Fundstrat Global Advisors joined CNBC in a recent interview. He has been one of the strong proponents and supporters of small-cap stocks. Lee says that we are in a volatile environment currently, due to a few reasons, one being the elections in less than 30 days, the second being the Middle Eastern crisis which is scaring investors, and lastly the port strike that has the potential to cripple the economy. However, he still expressed his optimism that the year-end has a lot of tailwinds and investors shouldn’t be afraid to buy the dip. Moreover, Lee also highlighted that these current events are all short-term headwinds in a buying cycle and are expected to die down quickly.
Lee thinks that bottoms are tough and processed, and small caps are in the process of what could be a multi-year bottom. Therefore the conviction is that some people might want to buy the big names on NASDAQ and the AI market, however, with small caps trading at lower multiples of P/E less than 10, the risk and reward lie in small caps. Lee further mentioned that interest rate cuts and better earnings growth make the path for small-cap growth more visible.
Tom Lee has also reaffirmed his belief that the S&P 500 could close above 5,700 by year-end, supported by strong economic fundamentals and a dovish Federal Reserve beginning to cut interest rates. He noted that significant cash reserves are available for investment, which could drive stock prices higher in the next three to twelve months.
In addition to this, another important news highlight has been regarding the jobs report, which has shown par expectation results. We recently covered the 8 Most Undervalued Growth Stocks To Buy According To Wall Street Analysts, here’s a short excerpt from the article:
“Analysts and the market blamed the Fed for not cutting the interest rate earlier in July. However, the sentiments seemed to have shifted with the recent jobs report with above-expectation data. The data from the Job market shows that Nonfarm payrolls increased by 254,000 in September and unemployment rates fell to 4.1% from 4.2%.
These new statistics are making the market think, was the 50 basis point too much another question that comes up is what the Fed will do in the next meeting. Sylvia Jablonski, Defiance ETFs CEO and CIO joined CNBC to discuss the issue recently. She mentioned that the Fed is data dependent and every move they make is based on the latest available data. The market was questioning the Fed for the delay in rate cuts, however, the data that the Fed had at the time was pointing towards the job market going the other way. Jablonski thinks that they made the right call to cut the interest rates by 50 basis points. However, with the current jobs market report it is difficult to expect another 50 basis point cut. She thinks that it will either be by a 25 basis point cut or no cut at all.
As of now the market seems to be doing good, the job numbers came in above expectations, and wages are good which tells that the consumers are likely to spend more which will be feasible for the economy. Jablonski also mentioned that the S&P 500 has been up by 20% in 2024 and thinks that the earnings for stocks are strong.”
Our Methodology
To curate the list of the 8 most undervalued penny stocks to buy according to analysts we first defined a criteria. We defined penny stocks to be the ones trading under the price tag of $5 and called a stock cheap if it is trading at a forward P/E lower than the market average of 24.35 (the market’s P/E ratio as per Wall Street Journal) with earnings expected to grow during the year.
To get our stocks we used the Finviz screener and used the aforementioned criteria. Once an aggregated list was ready, then we ranked the stocks based on analyst upside potential sourced from CNN. Please note that the figures are as of October 9, 2024.
Why do we care about what hedge funds do? 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 technician working with a network switch in a remote environment.
Lantronix, Inc. (NASDAQ:LTRX)
Share Price: $3.75
Forward P/E: 8.16
Earnings Growth: 17.50%
Number of Hedge Fund Holders: 13
Analyst Upside: 86.67%
Lantronix, Inc. (NASDAQ:LTRX) is an international IoT connectivity company that enables connectivity and computing across various industries, such as smart cities, automotive, and enterprise sectors.
They create small, integrated devices (like Compute System-on-Modules) that can be embedded into other products to add connectivity and processing power. It also provides systems that function as routers, switches, or gateways. These systems help manage data traffic and connect various devices efficiently.
The technologies of Lantronix, Inc. (NASDAQ:LTRX) are utilized in high-growth industries including smart cities, Automotive, and Enterprise. The company recently joined Qualcomm Automotive Solutions Ecosystem Program, an initiative aimed at accelerating innovation in the automotive sector. The partnership will allow the company to leverage Qualcomm’s resources and expertise to develop customized automotive solutions. Management has announced plans to showcase its Percepxion Edge AI Solution at an upcoming Qualcomm event, highlighting its integration with the Qualcomm AI Hub. The partnership highlights the prospects of Lantronix, Inc. (NASDAQ:LTRX) being used in high-growth industries such as autonomous driving vehicles.
Moreover, its FQ4 of 2024 was a record quarter in terms of revenue. The company generated $49.1 million, up 41% year-over-year. The full year 2024 was also a success as the company achieved a revenue of $160.3 million, a 22% growth year-over-year.
Revenue was not the only indicator that went up, annual net income of the company also improved by 22% from the previous year to reach $160.3 Million. This indicates a profitable business model for Lantronix, Inc. (NASDAQ:LTRX) investors.
180 Degree Capital Corp stated the following regarding Lantronix, Inc. (NASDAQ:LTRX) in its Q2 2024 investor letter:
“More recently, we have been working behind the scenes with the management and board of Lantronix, Inc. (NASDAQ:LTRX) on ways to solidify the strong foundation of the company and set it up for success and significant value creation for stockholders in the future. We believe LTRX’s new CEO, Saleel Awsare brings an interesting and successful background to LTRX. What we believe he needed to be in the best position for success were board members who have experience navigating the challenges unique to microcapitalization companies. Following multiple discussions, we introduced Saleel and his board to Narbeh Derhacobian, the former Chief Executive Officer and founder of our former portfolio company, Adesto Technologies, Inc., and one of Adesto’s board members, Kevin Palatnik, who has significant experience as a CFO at multiple related businesses. We were pleased to see that LTRX’s board saw the same value that we do in these individuals, in terms of helping Saleel and his team to have the best opportunities to achieve multiple catalysts that could lead to material increases in value for LTRX and its stockholders.”
Overall, LTRX ranks 5th on our list of most undervalued penny stocks to buy according to analysts. While we acknowledge the potential of LTRX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock 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.