On July 2, Joe Amato, President and Chief Investment Officer at Neuberger Berman, joined ‘Squawk Box’ on CNBC to discuss the latest market trends. Amato believes that there’s better value in small-cap stocks in H2 2025. There was a market rotation on July 1, where there was an unwind from higher-multiple sectors, such as tech and AI, into lower-multiple sectors. Amato explained that H1 2025 started with a market broadening out, where value and non-US equities began performing well, putting pressure on large-cap tech. However, the market then bounced back due to resilient economic data, improved trade, and better earnings, leaving behind sectors like value and small caps. This rotation was now occurring again. Neuberger Berman’s view is that true value lies in rotating into value and small-cap stocks, both of which had underperformed in H1.

On balancing exposure to large-cap tech, which had performed strongly, with the desire to invest in undervalued sectors, especially given the S&P 500 being around 6200, Amato acknowledged that the large-cap market was discounting a lot of good news, making them more cautious there. Consequently, their firm was at target allocation for large-cap stocks but was overweight in small-cap and non-US equities. These areas have underperformed for several years and offer better value for H2.

That being said, we’re here with a list of the 11 most undervalued small-cap stocks to buy according to analysts.

Methodology

We sifted through the Finviz stock screener to compile a list of top stocks that had a forward P/E ratio under 20 and were trading between $300 million and $2 billion. We then selected the 11 stocks with an upside potential of over 25%. The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q1 2025, which was sourced from Insider Monkey’s database.

Note: All data was collected on July 8. 

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

11 Most Undervalued Small-Cap Stocks to Buy According to Analysts

11. Pacira BioSciences Inc. (NASDAQ:PCRX)

Forward P/E Ratio as of July 8: 8.02

Market Capitalization as of July 8: $1.07 billion

Number of Hedge Fund Holders: 27

Average Upside Potential as of July 8: 25.11%

Pacira BioSciences Inc. (NASDAQ:PCRX) is one of the most undervalued small-cap stocks to buy according to analysts. On June 11, Pacira BioSciences announced new long-term follow-up data from its Phase 1 clinical trial of PCRX-201 (enekinragene inzadenovec), which is an investigational gene therapy for osteoarthritis of the knee.

The results were presented at the 2025 European Alliance of Associations for Rheumatology/EULAR Congress in Barcelona, Spain, and showed that a single intra-articular injection of PCRX-201 was well tolerated and led to sustained improvements in pain, stiffness, and function for up to 156 weeks in patients with moderate-to-severe osteoarthritis of the knee.

PCRX-201 utilizes Pacira’s proprietary high-capacity adenovirus (HCAd) gene therapy vector platform. It works by locally injecting into the knee joint to boost cellular production of interleukin-1 receptor antagonist (IL-1Ra), thereby blocking interleukin-1 pathway activation to alleviate chronic inflammation, pain, and improve function.

Pacira BioSciences Inc. (NASDAQ:PCRX) develops, manufactures, markets, distribution, and sells non-opioid pain management and regenerative health solutions to healthcare practitioners in the US.

10. Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD)

Forward P/E Ratio as of July 8: 11.99

Market Capitalization as of July 8: $765.53 million

Number of Hedge Fund Holders: 24

Average Upside Potential as of July 8: 28.66%

Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) is one of the most undervalued small-cap stocks to buy according to analysts. On June 30, Great Lakes Dredge & Dock Corporation announced that it has received 4 new work awards.

One of the awarded projects includes the Woodside Louisiana LNG project, for which the amount was undisclosed. Dredging operations for the project are expected to begin in early 2026. Another one is the Galveston Entrance Channel & Houston Ship Channel from Bolivar to Redfish maintenance project in Texas, valued at $36.2 million. Work for this is anticipated to commence in Q3 and conclude in Q4.

The Mississippi River Hopper Dredge Contract No. 3 for rental in Louisiana is valued at $17.6 million and is anticipated to commence in Q3 and conclude in Q4 as well. The Charleston Entrance Channel maintenance project in South Carolina is valued at $10.8 million. Work on this contract began in May earlier this year.

Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) provides dredging services in the US.