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4 crazily cheap small caps

After a couple of days of volatility over the unfolding situation in Ukraine, the market looks to have regained its footing and appears to be trending higher.

The higher the overall market level naturally means higher share prices and this can make it harder to find great investment opportunities – particularly amongst widely followed larger stocks. However while in general there may be less opportunities, there are still select opportunities amongst smaller-cap shares.

Here are four stocks such stocks that could be available at prices significantly below their intrinsic value and worthy of further analysis.

1)      Global Construction Services Limited (ASX: GCS) provides construction and maintenance services to a range of industries – not just the mining services industry. With earnings per share forecast to increase to 10.2 cents per share (cps) in the current financial year, the company is trading on a forward price-to-earnings (PE) ratio of 4.8.

2)      Imdex Limited (ASX: IMD) is a niche provider of services to the drilling industry. Its earnings have been affected by the slowdown in the resource industry and admittedly this could hamper the company for some time. That said the stock is trading on just 6.5 times last year’s earnings which may end up being close to a cyclical low.

3)      Sterihealth Limited (ASX: STP) is a specialist provider of clinical waste collection and disposal services to the medical, dental, veterinary and pharmaceutical industries. The company had a steady run over the past few years, although not spectacular. Annualising the recent half-year results suggests Sterihealth could earn 19.8 cps for the full year, which implies a PE ratio of 6.5.

4)      K2 Asset Management Holdings Ltd (ASX: KAM) had a great half-year result thanks to earning significant performance fees. The outlook for the fund manager remains sound with the company forecast to earn 8.6 cps in the current financial year. Based on its current share price of 74.5 cents, the stock is trading on a PE of 8.7.

Foolish takeaway

Small-cap stocks do come with their own set of risks on account of their smaller size; however with careful selection and sound portfolio management, a portfolio of small-cap stocks can help investors achieve solid returns.

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Motley Fool contributor Tim McArthur has no financial interest in any company mentioned in this article.

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