Enter the companies in the Russell 2000 index, which includes the 2,000 small-caps within the universe of U.S. equities. Analysts point out that small caps provide a higher growth potential compared to more established large-cap stocks. Secondly, they offer diversification benefits, as they tend to have less correlation with their large-cap counterparts. In addition, smaller companies are often under-researched by analysts, giving investors an opportunity to uncover hidden gems. Therefore, in this article, we delve into three Russell 2000 stocks that exhibit strong fundamentals and the capacity to navigate turbulent market conditions.
Atkore (ATKR)
Topping our list of Russell 2000 stocks to buy is Atkore (NYSE:ATKR), which provides electrical, safety and infrastructure solutions. The company has a strong presence in the electrical and cable management market. In recent years, Atkore has made strategic acquisitions both stateside and overseas, helping drive growth and increase market share.
In February, Atkore announced mixed first-quarter 2024 results. While net revenue declined 4.2% year-over-year (YoY), it came in at $798.5 million due to decreased average selling prices. Yet, it still beat market expectations. Net income saw a significant decrease of over 20%, mainly due to lower gross profit and higher costs. Adjusted net earnings per share (EPS) decreased 10.6% to $4.12, reflecting this lower net income.
Despite these challenges, Atkore’s management raised its fiscal 2024 outlook for adjusted EPS to be in the range of $16.50 to $17.50. The board also declared its first quarterly dividend, marking a significant milestone for the company.
So far this year, ATKR stock has gained 15%. Shares are attractively priced at 10.6 times forward earnings and 2.03 times sales. Meanwhile, analysts have a 12-month price target of $200 for ATKR, suggesting a potential upside of nearly 10% from current levels.
Matador Resources (MTDR)
Independent energy company Matador Resources (NYSE:MTDR) is the next name among our Russell 2000 stocks to buy. The company has carved out a niche for itself in the shale oil landscape. Management prioritizes unconventional plays, particularly the liquids-rich portion of the Wolfcamp and Bone Spring formations in the Delaware Basin.
Matador Resources delivered strong financial results for the first quarter of 2024 in April. Total revenue reached $787.7 million, reflecting a YoY increase of 40.5%. Adjusted net income also rose, reaching $206.2 million, representing a 14.6% increase. Adjusted earnings grew 15% YoY to $1.71 per diluted share.
One of the reasons behind the strong metrics was Matador’s high total production volume, along with an increase in the realized price of oil. The company averaged more than 149,700 barrels of oil equivalent (BOE) per day during the quarter. Management reiterated its bullish production outlook for 2024, projecting a total daily average of 153,000 to 159,000 BOE. Meanwhile, analysts note Matador has been able to maintain a low-cost structure while maximizing production efficiency.
Although MTDR stock has surged 15% year-to-date (YTD), it still looks undervalued within the energy sector. The stock is currently changing hands at 8.1x forward earnings, while the energy sector is trading at well over 10x. Despite the recent gains, Wall Street remains bullish, with a median 12-month price target of $77, or a potential 16% upside.
iShares Russell 2000 ETF (IWM)
Rounding out our discussion of Russell 2000 stocks is the iShares Russell 2000 ETF (NYSEARCA:IWM). This fund tracks the investment results of the Russell 2000 Index, offering a convenient way to gain exposure to U.S. small-caps,
Launched in May 2000, IWM holds around $59 billion in assets. The leading sectors in the fund include Industrials (17.6%), Financials (16%), Information Technology (14.8%), Health Care (14.8%) and Consumer Discretionary (10.5%). Among the top holdings are Super Micro Computer (NASDAQ:SMCI), MicroStrategy (NASDAQ:MSTR), Comfort Systems USA (NYSE:FIX), e.l.f. Beauty (NYSE:ELF) and Onto Innovation (NYSE:ONTO), account for over 3.7% of the fund’s roster.
Since the beginning of the year, IWM has traded flat. Meanwhile, the current valuation appears favorable, with trailing price-to-earnings (P/E) and price-to-book (P/B) ratios of 15.54x and 1.9x, respectively. Interested investors should also note the current dividend yield of 1.3% and annual expense ratio of 0.19%.
On the date of publication, Tezcan Gecgil did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.