We recently compiled a list of the 10 Best Value Penny Stocks to Invest in Now. In this article, we are going to take a look at where Manitrex International, Inc. (NASDAQ:MNTX) stands against the other value penny stocks.
The US market has been resilient over the past years despite higher interest rates, however, recent reports showed a sharp decline in the growth of the U.S. job market. According to reports from the Labor Department, the economy added just 114,000 jobs in July compared to 179,000 in June. This marks a sharp drop in employment generation from 482,000 in January 2023, raising the unemployment rate to 4.3% in July 2024, the highest level in nearly 3 years. The significant slowdown in hiring can potentially make the economy vulnerable to recession and therefore leads to an ease in monetary policy guaranteeing an interest rate cut in September. Economists are calling for a 50 basis point reduction in borrowing costs.
With the current uncertainty in the market and delay in rate cuts, investors are worried about a possible recession. The question is should investors pick penny stocks to diversify their portfolios? Penny stocks, though cheap, are without any doubt risky investments with a high rate of volatility and are even more sensitive to monetary policy changes. A higher interest rate negatively affects stocks’ earnings performance because these stocks are mostly running on debt and, therefore, can benefit from a possible rate cut in September 2024.
Moreover, these stocks are prone to speculative trading and scams, and therefore, are suitable for investors that can do diligent research and have a high tolerance for risk. However, not all stocks are the same and investors may yet benefit from long-term investments in high quality penny stocks with strong fundamentals. Value investing is an investment strategy focused on finding stocks that are being traded for less than their intrinsic or true value. In other words, value stocks are undervalued by the market and can be rewarding long-term investments once the market realizes their true value.
Investing in small-cap penny stocks is no doubt risky owing to their high volatility and low liquidity, however, using the value investing strategy one can generate long-term profits from investing in these stocks.
Investing in Small-cap Stocks in 2024
Most penny stocks have small market caps. Large-cap stocks generally dominate the market outperforming small-caps, and last year was no different as the large-cap stocks beat small-cap stocks by an average of 9.6 percentage points. Moreover, in 9 out of the last 10 years, large caps outperformed penny stocks, however, small caps showed competitiveness back in the days of the internet boom, when the dot-com bubble was breaking in the period 1999 to 2004.
There is hope for a small-cap rebound in 2024, and that is because the historical trends tell us that after nearly a decade of underperformance, the tables turn and small-caps, which include many penny stocks, can rebound. Moreover, in the fourth quarter of 2023, penny stocks showed a recovery in growth and this could set the stage for a renaissance for the small-caps in 2024.
In a recent interview with CNBC, Fundstrat’s head of research, Tom Lee expressed optimism about the potential rise of small-cap stocks in 2024 owing to the softening of inflation in June. Tom Lee further discussed the performance of the small-cap stocks that rose 30% in 8 weeks from October to December 2023. Lee believes that the current rally can be even more substantial compared to last year as it’s driven by factors like larger institutional short positions, small-cap even more oversold, and valuations like median P/E at 10 times 2025 earnings. In addition, June’s Consumer Price Index has declined to its lowest level in the last 3 years, this can lead to the feds cutting the interest rate expected in September 2024. According to the estimates of Tom Lee, in case the interest rate is cut down, the small caps can gain as much as 50% in 2024.
Secondly, presidential elections have been historically in favor of these stocks, research shows that seven out of eleven election times, the small-cap outperformed by an average of 2.68 percentage points.
The recent consumer price index data released in June 2024, suggests a deceleration in inflation, the prices are getting stabilized particularly in core consumer segments such as shelter and food. According to the latest Inflation report, the Personal Consumption Expenditure index (PCE) rose by 0.1% from April matching the Wall Street expectations. Furthermore, the report shows a growth of 0.5% in personal income in the U.S. which is up by $114.1 billion. This potential relief to consumers can stabilize the US market and might influence the Federal Reserve’s Monetary policy decisions in favor of small-cap by cutting interest rates as expected by the end of 2024.
Methodology:
To compile this list of the 10 best-value penny stocks to invest in, we used a screener to narrow down penny stocks trading under $5 on the basis of relatively lower forward p/e ratios compared to their respective industry averages. We further screened these stocks by using metrics like institutional ownership of greater than 40% and ensured that the companies had positive upsides based on analysts’ consensus.
After shortlisting the stocks based on the above-mentioned value metrics, we ranked those stocks based on hedge fund sentiment towards each stock. To rank the penny stocks, we assessed Insider Monkey’s database of hedge fund sentiment of 920 elite hedge funds and their holdings tracked at the end of the first quarter of 2024.
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 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A closeup view of a rough terrain crane in use, showing the strength of the machinery.
Manitrex International, Inc. (NASDAQ:MNTX)
Number of Hedge Fund Holders: 8
Manitrex International, Inc. (NASDAQ:MNTX) is a firm related to the Farm and Heavy Construction Machinery industry that manufactures heavy-lifting machinery to aid in the construction business. The company provides engineered lifting solutions in the U.S., Canada, France, and Internationally. Manitrex International, Inc. was founded in 2003 as a result of a merger of three companies specializing in crane manufacture and distribution, these companies are: Manitrex, Badger Equipment, and an Italian company called PM.
The firm manufactures and develops cranes, boom trucks, sign cranes, truck cranes, rough terrain cranes, and material handling products. This heavy machinery is primarily used in industrial projects, energy exploration, and infrastructural development.
Manitrex International, Inc. (NASDAQ:MNTX) delivered a strong first-quarter 2024 performance with a revenue of $73.8 million that grew by 8% year-over-year. Moreover, the company reported a 17.2% YoY growth in gross margin of $16.9 million.
The performance was driven by strong sales growth in North America coupled with continued cost reductions and improvement in business operations. In addition, there was solid growth in both lifting equipment and rental segments.
The lifting equipment segment generated a revenue of $66 million, up by 7.9% YoY, driven by ongoing improvements and innovation in the lifting machinery business. In addition, the rental segment grew by 9.2% YoY generating a revenue of $7.4 million in Q1 2024. The growth in rental revenue was driven by the expansion of business through the Lubbock, Texas location that opened in March 2023 and contribution from strong end-market demand, new rental fleet, and pricing gains through expansion into the Lubbock Market.
Manitrex International has recently adopted the PM 70.5 articulated truck-mounted crane to its product portfolio. This crane is the latest advancement in the PM group 65 series of articulated cranes with a wide range of applications for the global construction market. The novel crane offering from PM group is being sold to the European markets and is expected to be launched in the North American market later this year. This launch is projected to boost the lifting segment growth in the future.
Though the company put forth strong earnings in this quarter, there are some headwinds in terms of the current market uncertainties that have declined new orders. In addition, the adjusted EBITDA for the trailing 12 months couldn’t meet the expected target range and was slightly below the range of 11 to 13%.
Let’s look at the company’s fundamentals, Manitrex has a trailing P/E ratio of 10.35 compared to its competitor industries’ average of 12.52. Moreover, the company has a forward PE of 13.73 based on the earnings forecast and changing market trends affecting the share price. Furthermore, the company reported a Non-GAAP EPS of $0.17 beating the analyst’s expectations by $0.09 showing growth in YoY earnings.
According to Insider Monkey’s database, 8 hedge funds held stakes in Manitrex International, Inc. (NASDAQ:MNTX). Royce and Associates group managed by Chuck Royce had the largest stake of 1.48 million shares worth $10.18 million.
Overall MNTX ranks 8th on our list of the best value penny stocks to buy. While we acknowledge the potential of MNTX 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 an AI stock that is more promising than MNTX 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.