2 Massively Undervalued Small Caps

Last week, the S&P 500 marked a 3.48% gain on account of ostensibly decreasing tensions in the Middle East. Although the most recent round of talks has collapsed, recent market dynamics suggest that a relatively swift recovery is in order once the conflict is settled.

Looking at performance in the last 30 days, it becomes quickly apparent that mid-cap and small-cap stocks have fared significantly better than their large-cap counterparts. Recent price action hasn’t been different — while the benchmark index, as mentioned, rallied by 3.48%, the Russell 2000 rallied by 4.06% in the same timeframe.

Two simple conclusions can be drawn from this. The first, we already made — small caps have proven more resilient. The second is that when risk appetites do recover, small caps seem poised to benefit more than large caps.

However, those conclusions don’t necessarily lend themselves to a simple plan of action. Small caps tend to be more volatile, they suffer from a lack of analyst coverage, and they’re much more numerous. To take advantage of recent market dynamics, you need a reliable, proven way to separate the rare instance of wheat from an abundance of chaff.

Thankfully, there’s a simple way for you to go about things. All you have to do is turn to …

Small Caps Stock Strategy

Our in-house quant system scans through 4,600 stocks on a daily basis, and rates them through the lens of 115 metrics and factors split across 7 categories called Component Grades. Those insights come together to form a single, straightforward, and user-friendly metric — a stock’s Zen Rating.

Only the stocks that rank in the top 5% overall are given a Zen Rating of A, equivalent to a Strong Buy rating. That narrows the search down quite a bit, but it still leaves roughly 230 stocks to consider on any given day. 

However, there’s a way to make your analysis even more efficient. Simply make use of one of our exclusive Zen Strategies.

There are 11 Strategies in total — each consists of just 7 stocks carefully selected to deliver outsized Alpha. Today, we’ll be taking a look at one of our top-performing portfolios. It has an all-time annual return of 38.33%, has secured an 11.32% gain since the start of 2026, and it’s up by 10.7% in the last 30 days. We’re talking about our Small Caps stock strategy.

Now, let’s see 2 tickers from this portfolio — both of which were included in it this month.

Bioventus (BVS)

Bioventus is a medical device company focused on musculoskeletal conditions and surgical tools. BVS is currently the top-rated stock in the Medical Device Industry, has a Zen Rating of A, and it ranks in the top 1% of the stocks that we track. In fact, it’s the 2nd highest-rated stock on our entire list of 4,600 tickers.

The valuation is what makes BVS special. The stock is currently trading at a price-to-earnings growth (PEG) ratio of just 0.6x, as well as a price-to-sales (P/S) ratio of 0.6x. Our fair value estimate currently sits at nearly $27, while the stock is trading around $9. In terms of the Value Component Grade rating, BVS ranks in the 95th percentile; in other words, in the top 5%.

Another strong point, especially in these tumultuous times, is the high mark it gets for Safety. In that category, it ranks in the 92nd percentile. There’s also a pattern of strong execution, as the business has beaten EPS estimates for 11 quarters in a row.

However, what truly ties the case together are high marks for Financials and Growth. When it comes to the former, it’s in the top 3%, and for the latter, it ranks in the top 2%. Earnings are estimated to grow by 44.4% per year, ahead of the industry average of about 24% — all that, plus a bargain price.

The risks boil down to C grades for Momentum and Sentiment. There, it ranks in the 63rd and 74th percentile, respectively. Not terrible, but not great either. With that said, analyst coverage is positive — both of the analysts who track the stock have Buy ratings, and their price targets imply upside of 54% and 76%. 

BVS delivered its most recent earnings beat on March 5. Since then, the stock has been relatively flat, losing some 0.4% in value. Bioventus shares are already on a steep discount, and when the risk appetites return, it will be a prime candidate for a renewed rally — particularly if the next earnings report, due May 12, turns out well.

Toyo (TOYO)

Toyo is a vertically integrated solar company operating across the entire value chain, from wafers and cells all the way to finished photovoltaic modules. Toyo ranks in the top 1% of the stocks that we track, and it is currently the 9th highest-rated stock in our system, as well as the top-rated stock in the Solar industry.

The stock ranks in the top 21% for Sentiment, indicating significant smart money accumulation. It’s covered by 2 analysts, whose ratings are split between a Strong Buy and a Buy rating. Financials are another strong mark — here, TOYO shares rank in the 90th percentile.

What’s truly exceptional is the mix of high ratings in terms of Momentum, Growth, and Value. First, Momentum — Toyo has rallied by almost 87% in the past 3 months, which puts it in the top 2% in this category. Earnings are forecast to grow 4.5 faster than the industry average (103.01% vs 22.53% annually), while revenues are expected to grow 6.2 times faster than the industry average (58.6% vs 9.34% annually). This places TOYO firmly in the top 3% of stocks when it comes to Growth.

And lastly, we have Value. Despite the rally, despite the lofty growth expectations, TOYO is trading at a PEG of 0.12x, and a price-to-sales ratio of 0.48x. When it comes to the Value rating, the stock is in the top 1%.

The cons here are an unexceptional Sentiment score and a low Safety score. Smart money isn’t fully on board yet — and volatility is to be expected. However, with the exception of those two categories, all of the other fundamentals are exceptionally strong, which provides us with an asymmetric bet that leans in our favor. The valuation is simply too appealing — but if price action continues to unfold the way it has been unfolding, the discount won’t last much longer.

Interested In More Great Stock Picks?

The 2 stocks highlighted above are just a fraction of what you get from our proven Small Caps strategy.

That’s because each day our system recalibrates — and Zen Strategies members get access to the top 7 artificial intelligence stocks based on 115 different parameters that point to outperformance. 

See all Top 7 Small Caps Stocks here >

However, maybe small cap stocks are too risky for your current appetite. Perhaps you would like to see all 11 of our market beating strategies including Growth, Value, Momentum or perhaps even Income stocks. 

Each featuring the top 7 stocks.

Each featuring tremendous performance.

We spell it all out in this timely presentation below that lives up to its name:

77 Best Stocks Now! > 

What to Do Next?

• 77 Best Stocks NOW! >
• Options Trading with the Zen Ratings >
• 2 New Stocks to Buy from Steve Reitmeister >

Want to get in touch? Email us at news@wallstreetzen.com.