3 Small-Cap Stocks to Buy in February

Why Atlas Energy, Wabash International, and Target Hospitality are worth a closer look today.

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For all the excitement surrounding large-cap stocks and the market indexes hitting new highs, it’s easy to forget about the little guys. But for investors who know where to look, small-cap stocks — loosely defined as companies with market capitalizations of between $250 million and $2 billion — offer an outsized chance to absolutely trounce the broader market’s returns.

As you look for your next portfolio candidates, here are three small-cap stocks we think are worth considering this month:

🤏Small-Cap Stock #1: Atlas Energy Solutions (AESI)

In the ever-evolving landscape of the financial markets, Atlas Energy Solutions Inc. (NYSE: AESI) is a burgeoning powerhouse in proppant and logistics services within the highly competitive oil and natural gas industry of the Permian Basin. Founded in 2017 and headquartered in Austin, Texas, Atlas has demonstrated remarkable growth and resilience, transforming from a startup into a leading provider in just a few years.

A Look at the Financials

Atlas Energy's financial journey from its inception has been nothing short of incredible. The company saw revenue more than quadruple from $111 million in 2020 to $482 million by 2022. This growth trajectory is not just in revenue; Atlas flipped its financial script from a loss of $32 million in 2020 to a striking profit of $97 million last year. In a challenging economic environment, such performance is commendable and highlights the company's robust operational efficiency and market demand for its services.

Atlas Energy's commitment to shareholder value is also evident through its attractive dividend yield of 5%. In a market where yield is increasingly sought after, this makes Atlas not just a growth story but also an income-generating investment.

Operational Excellence and Competitive Edge

Atlas Energy Solutions isn't just another name in the oilfield services sector; it's a company that prides itself on innovation and operational efficiency. Founded by Ben “Bud” Brigham, a former oil and gas operator with a keen eye for innovation, Atlas has quickly ascended to become the leading sand supplier in the Permian Basin.

The company's unique approach to sourcing sand through dredge mining from the Monahans sand hills is a game-changer. This method not only reduces operational expenses by cutting down on personnel and diesel usage but also positions Atlas as the sole player utilizing this more efficient technique extensively. The introduction of two additional dredges promises to further solidify this advantage, enabling Atlas to sustain its cost leadership in the industry.

Atlas's Dune Express sand transport system, triple-trailer last-mile logistics solutions, and automated warehouse design further exemplify the company's commitment to innovation and efficiency. These strategic advantages have not only bolstered Atlas's position in the market but have also contributed to its financial success.

Investment Considerations

Despite its operational success and financial growth, Atlas Energy Solutions trades at an EV/EBITDA multiple of about 5.5X, reflecting the current downturn in drilling and completion activity within the Permian Basin. However, with minimal debt and no immediate risk of insolvency, Atlas presents a compelling investment case for those looking for long-term value.

Wall Street analysts are bullish on Atlas, with price targets reaching as high as $25.00. While the near-term earnings per share (EPS) forecast shows a slight dip in Q-4 2023, projections indicate an upward trajectory starting from Q-1 2024. This forecast aligns with the company's growth strategy and operational efficiencies, suggesting that the current price levels may offer a strategic entry point for investors.

Atlas closed at $17.28 per share on Thursday, touching its resistance line and hinting at a potential breakout. This technical indicator, coupled with the company's solid fundamentals, suggests that Atlas Energy Solutions Inc. (AESI) may be poised for further growth, making it a small-cap stock worth considering for those looking to diversify into the energy sector with a company that's not just surviving but thriving.

Final Considerations

Atlas Energy Solutions is on a “larger” side for a small-cap stock with its market cap of just over $1.7 billion today. But it represents a rare blend of growth, innovation, and dividend yield, making it a standout option for investors seeking exposure to the oil and gas services sector. With its technological and logistical innovations, strong financial performance, and strategic market positioning, Atlas is more than just an investment; it's a testament to the potential of smart, efficient operations driving value in the energy industry.

🤏Small-Cap Stock #2: Wabash National (WNC)

Wabash National Corporation (NYSE: WNC) is another small-cap powerhouse in the transportation, logistics, and distribution industries. The company has demonstrated an impressive growth trajectory and innovation in connected solutions. Specializing in the design, manufacture, and distribution of essential products and services, Wabash National stands out as a promising investment opportunity for those keen on tapping into a sector fundamental to the economy's backbone.

Financial Renaissance: A Deep Dive into Wabash National's Growth

Wabash National's financial health has taken a significant turn for the better, demonstrating robust growth that can't be ignored. From 2020 to the present, the company's total revenue soared from $1.48 billion to an impressive $2.60 billion. This dramatic increase underscores Wabash's ability to expand its market presence and adapt to the ever-changing demands of the transportation and logistics industry.

Even more telling of its financial acumen is the gross profit transformation witnessed over the same period. Wabash National's gross profit quadrupled, climbing from $159.75 million in 2020 to a staggering $484.56 million. This leap in profitability is a testament to the company's operational efficiency and strategic positioning in high-margin areas.

The Driving Forces Behind Wabash National's Success

Wabash National operates through two segments: Transportation Solutions and Parts & Services, with each contributing uniquely to the company's success. The Transportation Solutions segment offers everything from dry van and platform trailers to stainless steel and aluminum tank trailers, and caters to a diverse clientele across various end markets. This breadth of product offerings enables Wabash to meet a wide range of customer needs, driving its revenue growth.

Meanwhile, the Parts & Services segment ensures sustained income through aftermarket parts and services. By providing essential maintenance services and innovative products like stainless steel storage tanks and composite products, Wabash National not only diversifies its revenue streams but also strengthens customer loyalty and enhances its market footprint.

Innovation at the Core

Wabash National's commitment to innovation is evident in its product lineup, including the DuraPlate, AeroSkirt, and EcoNex brands. These offerings underscore the company's focus on developing solutions that not only meet the current demands of the transportation and logistics industries but also anticipate future needs. Through continuous R&D, Wabash National stays ahead of industry trends, positioning itself as a leader in efficiency and sustainability.

Why Wabash National is a Compelling Buy

With a market cap of just under $1.2 billion today, Wabash National embodies the ideal small-cap stock with massive growth potential. Its remarkable revenue and gross profit growth, combined with a solid business model that spans across critical segments of the transportation industry, make it a compelling portfolio candidate.

Investors looking for a stock with a proven track record of financial performance, strong market position, and commitment to innovation need look no further than Wabash National. As the company continues to expand its offerings and capitalize on the growing demands of the global transportation and logistics markets, it is poised for further gains, making it a small-cap stock that's not just surviving but thriving — and printing money for its investors.

In an era where the transportation and logistics sector is more vital than ever, Wabash National Corporation stands out as a beacon of growth, innovation, and investment potential. For those willing to delve into the small-cap market, WNC offers a golden opportunity to be part of a company that's not just keeping pace with industry evolution but driving it forward.

🤏Small-Cap Stock #3: Target Hospitality (TH)

Target Hospitality Corp. (NASDAQ: TH) has positioned itself as a leader in its niche, catering to a diverse client base that includes the U.S. government, energy infrastructure companies, and investment-grade natural resource development companies. As investors scour the market for potential growth stories, Target Hospitality presents an intriguing case.

A Financial Transformation That’s Just Beginning 

Over the past few years, Target Hospitality has undergone a financial metamorphosis that is hard to ignore. From 2020 through 2023, the company's total revenue has more than doubled, jumping from $225.1 million to an impressive $589.8 million. This surge in revenue is a testament to the company's expanding operations and its ability to secure and fulfill significant contracts across its varied service segments.

Even more striking its its growth in gross profit, which has ballooned from $57.2 million in 2020 to $334.983 million currently. Such a substantial increase highlights the company's operational efficiency and its success in leveraging its unique service offerings for maximum profitability.

Strategic Segments Driving Success

Target Hospitality operates through four distinct segments: Hospitality & Facilities Services - South, Hospitality & Facilities Services - Midwest, Government, and TCPL Keystone. This segmentation allows the company to tailor its services to the specific needs of its clients, whether it's providing accommodation units, catering and food services, or comprehensive community management services. The company's ability to offer a wide array of essential services has made it an indispensable partner to its clients, underpinning its financial success.

A Vote of Confidence from the Investment Community

The company's potential has not gone unnoticed by the investment community. Recently, Private Capital, a seasoned player in value investing, significantly increased its stake in Target Hospitality, adding 692,788 shares to its portfolio. This move, executed at a trade price of $9.73 per share, underscores the confidence that seasoned investors have in Target Hospitality's growth trajectory and its ability to generate shareholder value.

Looking Ahead: Target Hospitality's Growth Prospects

With a market cap of just over $950 million as of this writing, Target Hospitality is positioned at a sweet spot of being large enough to undertake significant projects but still small enough to offer substantial growth potential. The company's comprehensive service offerings, combined with its strategic focus on sectors with long-term growth prospects, such as government contracts and natural resource development, position it well for continued expansion.

The company's recent financial performance, coupled with strategic investments from prominent investors, suggests that Target Hospitality is on a firm footing. Its ability to more than double its revenue and gross profit in a challenging economic environment speaks volumes about its operational prowess and market demand for its services.

Target Hospitality Corp. stands out as a unique investment opportunity within the specialty rental and hospitality sector. Its impressive financial turnaround, strategic service segments, and the recent vote of confidence from the investment community mark it as a company on the rise. For investors looking for a blend of growth potential and stability in a niche market, Target Hospitality presents a compelling case worth considering. As the company continues to expand its services and capitalize on new opportunities, it remains a stock to watch in the coming years.


There are no guarantees in the world of equities investing. But we believe Atlas Energy Solutions (AESI), Wabash International (WNC), and Target Hospitality (TH) are all small-cap names that represent attractive values relative to both their current business performance and long-term potential.

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