After years of underperformance relative to large caps, small-cap equities are entering a more favorable macro window. Inflation is moderating, rates have stabilized, and investors are beginning to reward disciplined execution and durable cash flows in the under-$5 billion market cap space. Each company listed below reflects a different sector trend, but all share a key attribute: fundamental improvement is outpacing investor attention.
1. InMode Ltd. (INMD)
Market Cap: ~$1.5B
Sector: Medical Devices
InMode gained attention during the post-COVID recovery as consumers returned to discretionary health and beauty procedures. The company’s minimally invasive body contouring and aesthetic treatment systems filled a niche between surgical and topical solutions. After peaking in 2021 amid retail enthusiasm, the stock declined over 60% as multiples compressed and growth slowed.
But now, InMode is quietly rebuilding momentum. International markets, particularly Europe and Latin America, are driving revenue growth, while gross margins remain above 80% — rare for small-cap medical device firms. With cash on hand and no debt, InMode is structurally sound and trading at less than 12x forward earnings.
2. Bank of Hawaii Corp. (BOH)
Market Cap: ~$2.3B
Sector: Financials
BOH is one of the more conservatively run regional banks in the U.S., but it became collateral damage during the 2023 regional banking turmoil following the collapse of SVB and Signature Bank. Investors indiscriminately sold smaller banks, especially those perceived as geographically concentrated.
Yet BOH avoided major balance sheet issues. It maintains a high-quality loan book, strong Tier 1 capital ratios, and a sticky, affluent customer base with below-average default risk. With deposit outflows now reversed and loan demand normalizing, BOH is revaluing off of a 9x forward P/E, while offering a 4.5% dividend yield.
3. Tidewater Inc. (TDW)
Market Cap: ~$2.2B
Sector: Energy Services
Tidewater was left for dead during the oil downturn of the 2010s, even filing for bankruptcy in 2017. But since then, it has restructured, streamlined operations, and benefited from a renewed cycle in offshore oil and gas exploration, particularly in West Africa, the North Sea, and Latin America.
The firm owns and operates a global fleet of marine support vessels used for offshore rig servicing. As energy capex recovers post-COVID and geopolitical instability supports fossil fuel demand, day rates and vessel utilization are rising. The company is now free cash flow positive, and analysts expect 30%+ EBITDA growth in 2025.
4. Atkore Inc. (ATKR)
Market Cap: ~$4.4B
Sector: Industrials
Atkore makes electrical conduit, safety infrastructure, and mechanical tubing — the kind of dull but essential components found in every major building project. It benefited from the 2021–2022 construction boom, but was later punished as prices for steel tubing corrected and residential activity slowed.
What investors missed is that Atkore is also tied into U.S. industrial reshoring and grid modernization, two themes now accelerating under federal infrastructure packages. The company has used free cash flow for buybacks, reduced debt, and has pricing power in niche verticals. At just over 8x forward earnings, it’s a value play with cyclical upside.
5. Xometry Inc. (XMTR)
Market Cap: ~$700M
Sector: Industrial Tech
Xometry operates a B2B marketplace for custom part manufacturing, connecting engineers and procurement teams with small-scale manufacturers. It exploded onto the scene in 2021 during the supply chain crisis, pitching its network as a resilient alternative to traditional supply chains.
After its IPO, the stock was heavily sold off due to high marketing spend, weak margins, and general tech sector rotation. But by mid-2025, the company has narrowed losses, increased recurring platform revenue, and won long-term procurement contracts with aerospace and medical device firms. If operating margin targets are met this year, XMTR may start trading like an infrastructure SaaS company, not a gig-economy manufacturer.
6. Veritone Inc. (VERI)
Market Cap: ~$250M
Sector: AI / Software
Veritone has had one of the more volatile paths among AI-adjacent small caps. After rallying in the early AI hype cycle (2019–2021), it lost over 85% of its value as enthusiasm faded and its use cases remained unclear.
Now, the company has focused on specific verticals — legal transcription, media asset licensing, and government surveillance. Contracts with law enforcement and public broadcasters are providing more stable ARR, and management expects to hit EBITDA breakeven by Q4. Still speculative, but the upside is material if execution holds.
7. Compass Diversified Holdings (CODI)
Market Cap: ~$1.6B
Sector: Multi-Sector Holding
Structured like a permanent capital vehicle, CODI owns controlling stakes in a mix of niche businesses — from firearms and sporting goods to medical supplies and industrial textiles. It trades like a mini-Berkshire, but with a focus on cash distribution and hands-on operational control.
CODI has weathered inflation well by maintaining pricing power across its brands and rotating capital from underperforming segments into stronger ones. The company pays a stable dividend and continues to benefit from long-duration consumer and defense trends.
8. AppHarvest Inc. (APPH)
Market Cap: ~$130M
Sector: AgTech
AppHarvest was one of the most hyped “green future” IPOs of 2021, pitching itself as a solution to food insecurity and climate change through high-tech indoor farming. The pitch was strong, but execution faltered: high opex, overbuilding, and liquidity issues sent shares down over 90%.
Since then, AppHarvest has cut costs, exited underperforming facilities, and signed retail distribution deals with East Coast grocers. While it’s still speculative and unprofitable, the reset offers a cleaner story. With urban agriculture gaining relevance again in policy circles, APPH could reemerge as a climate-focused recovery stock.
9. Parsons Corp. (PSN)
Market Cap: ~$4.9B
Sector: Defense & Infrastructure
Parsons has flown under the radar despite consistent growth in cybersecurity, digital engineering, and critical infrastructure design for U.S. federal agencies. Defense spending has increased year-over-year, and new mandates around domestic infrastructure safety have expanded the company’s addressable market.
With multi-year, government-backed contracts, Parsons offers steady cash flow and margin predictability. It also recently acquired a space infrastructure firm, quietly entering the satellite engineering and space logistics market. Its mix of defensive stability and slow-tech innovation appeals to both income and growth investors.
10. SunCoke Energy Inc. (SXC)
Market Cap: ~$650M
Sector: Materials / Industrial Commodities
SunCoke produces metallurgical coke, a key input in steelmaking. It's not glamorous, but it's essential — especially as U.S. steel mills ramp production under Buy American provisions and reshoring pushes. SXC operates under long-term fixed contracts, giving it rare earnings visibility in the commodity space.
The firm trades at a double-digit free cash flow yield, has stable operating margins, and minimal capex needs. While its growth runway is limited, it’s drawing attention from value-focused funds seeking hard-asset exposure with contractual earnings.
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