Analysts Say These 3 Small Caps are Buys

When an analyst changes or reiterates his or her stock rating it can be for a variety of reasons.

Sometimes it relates to shifting industry dynamics that will improve the financial results of an entire group of stocks. Other times it is a company-specific event such as an earnings release or other major announcement. There are also situations when a company is new to the public market and coverage is initiated.

In recent days, analyst activity has picked up with the start of third-quarter earnings season a big factor. Much of the action has been in the U.S. small cap space where investors can discover some lesser-known names with good growth potential.

Let’s look at a few of the stocks that have received multiple ‘buy’ ratings from analysts this week.

What Does Wall Street Think About Sierra Metals?

On Monday, diversified Canadian mining company Sierra Metals (NYSEAMERICAN: SMTS) provided an update on its third-quarter production. The production levels at its three Latin American mines combined was down considerably from the prior year period. Copper, zinc, gold, silver, lead, and copper volumes were each down at least 20% due to ongoing COVID limitations and the availability of mining equipment. Hot temperatures at the mines also contributed to cooler production levels.

Despite the results, management struck an upbeat tone which resonated well with sell-side analysts. It noted that the aforementioned issues are “temporary in nature” and that it still expects to reach the low end of annual production guidance. This is expected to be accomplished by ramping production at each of its mines in Peru and Mexico.

Three firms reiterated their ‘buy’ ratings on Sierra Metals in the wake of the report. The price targets range from $3.08 to $4.00 which at the midpoint represents 57% from current levels. This stock trades on the NYSE American Exchange and is considered a high-risk penny stock. Investors with a hearty risk appetite looking for a diversified metals play may want to dig a bit deeper.

What Does Thorne Healthtech Do?

Thorne Healthtech (NASDAQ: THRN) made its Nasdaq debut about a month ago and has essentially treaded water since. That may be about to change after a four-pack of sell-side firms called the small-cap health technology company a buy.

Cowen, RBC Capital, Evercore ISI, and Bank of America all took a bullish stance on Thorne this week. Three of the four agreed on an $11 target price while Evercore is more optimistic with a $13 target. The analyst at RBC Capital stated that Thorne Healthtech has the potential for 30% annual revenue growth over at least the next three years due to recent its marketing investments.

To achieve such growth the company has several levers it can pull. Its flagship Ongevity platform which provides personalized health recommendations will be a key driver. Thorne Healthtech is also entering the health supplement formulation and production market which holds the potential to be an important complementary growth source.

Thorne Healthtech’s business is based on developing products and technology that extends the life span of consumers. This includes not just health supplements but data-driven solutions that prevent chronic health conditions. Much of its ramped marketing spending is going toward professional athletes and social media influencers. With Wall Street rooting for the team as well, Thorne Healthtech’s growth trajectory may have longevity of its own.

Are Analysts Bullish on Sovos Brands?

Sovos Brands (NASDAQ: SOVO) is another stock that’s new to the Nasdaq. Analysts have ripped into the packaged food company this week, and in a good way.

A perfect 11 out of 11 analysts have deemed Sovos Brands a ‘buy’ and the target price range is relatively tight at $16 to $20. The stock has responded nicely to the wave of analyst support jumping to its highest level since last month’s IPO.

Why is the Street so bullish on Sovos Brands? Valuation seems to be a key part of the investment thesis. Barclays commented that the market isn’t building enough growth into the share price. Goldman Sachs made similar remarks saying the growth is “underappreciated by the market”.

A big contributor to the growth is expected to be the company’s core Rao’s brand, an assortment of Italian sauces, soups, and pastas which is gaining space on grocery store shelves. Momentum is also building in Sovos Brands’ noosa yogurt, Birch Benders pancake and waffle mixes, and Michael Angelo’s frozen Italian cuisine offerings.

Investors will get their first taste of Sovos Brands financial performance when the company holds its third quarter update on November 9^th. Yes, the health-focused packaged goods space is immensely competitive these days. But with multiple growth brands and overwhelming analyst support, Sovos Brands looks like an appetizing defensive play that comes with a healthy portion of growth.