5 Undervalued Small Caps Showing Signs Of Breaking Out

It's already been an eventful week for U.S. markets, with tensions in the Middle East bubbling and then calming down following a weekend of bombardment. But despite the uncertainty regarding a potential ceasefire, the stock and commodities markets shrugged it off with the NASDAQ 100 finally notching a new all-time high and oil prices dipping back under $66 per barrel.

Markets are not out of the woods yet, as consumer sentiment continues to be shaky and the Fed remains on hold awaiting more economic data on the impact of tariffs. But the trend toward new all-time highs appears strong and retail traders are back to being bullish.

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Each of the five stocks rates highly on Benzinga Edge's Value Score rankings and exhibits technical signals indicating that momentum shifts may be brewing beneath the surface.

Costamare Inc. 

Benzinga Edge Value Score: 98.04

Bulk shippers like Costamare CMRE have been caught in the Trump administration's tariff tug-of-war, but the decline has been so steep that the stock now appears undervalued. Despite a Q1 2025 earnings beat on both EPS and revenue, CMRE trades at just 3.7 times earnings and 0.5 times sales, and the dividend now yields over 5%.

CMRE spent most of the last 12 months in a prolonged downtrend. The stock peaked at $12.75 in June 2024 before dropping nearly 50%, with frequent false signals when the Relative Strength Index (RSI) tripped the Oversold alarm.  But the stock rallied after the market bottom that followed Trump's reciprocal tariff announcement, gaining 10% and finally breaking through the long-term resistance level that had been in place for nearly a year. The RSI anticipated the breakout and actually triggered an Overbought signal twice in May and June, but now that it's back below 70, the new uptrend can continue.

Peabody Energy Corp. 

Benzinga Edge Value Score: 98.08

Coal miners have also struggled in 2025 despite reassurances from the Trump administration. Small caps like Peabody BTU ($1.54 billion market cap) have been trending downward since Election Day. But BTU now trades at just 5 times forward earnings and 0.4 times sales, but its terrible start to 2025 (down 40% year-to-date) could be about to change. 

Peabody's stock didn't experience a lengthy drawdown like CMRE, but the decline's brevity didn't mask its fierceness. The stock dropped more than 60% from Election Day to Easter, trading in a tight range with multiple failed attempts to breach support and resistance levels. The downtrend finally broke in April, and although the stock hasn't exactly gone parabolic, the breakout was confirmed by a bullish MACD crossover in May. The climb back to new highs might be a slow one, but BTU has an attractive valuation and a chart signaling the momentum has turned. It also still has a short interest of over 17%, which could further fuel any rallies in the coming days or weeks.

Hello Group Inc. 

Benzinga Edge Value Score: 97.31

Hello Group MOMO was a meme stock before there were meme stocks; its chart from 2017 and 2018 is enough to give even seasoned investors vertigo. But those days are long gone, and the stock has spent years trying to break out of a fortress-like resistance level. However, now that the stock trades at just eight times earnings and 0.7 times sales, investors are giving it a second look, and that resistance level has finally been broken.

Talk about lengthy range-bound trading, Hello Group has traded between $5 and $8 since September 2023, and has failed multiple attempts to break through the resistance level above the $8 mark. But the MACD is showing outsized bullish momentum compared to previous quarters. The share price finally crested $8.15 for the first time in nearly two years. Volatility is increasing (did you expect something different with the ticker MOMO?), but if the old resistance level becomes support, this stock might not be done posting explosive gains in 2025.

Hamilton Insurance Group Ltd. 

Benzinga Edge Value Score: 95.46

Hamilton HG, a small-cap insurer based in Bermuda, has a market capitalization of $2.15 billion and annual sales of $2.3 billion. Strong earnings and guidance raises have fueled the stock's recent upward move, as the company handily beat EPS (0.48 per share vs. the expected 0.04) and revenue estimates ($843 million vs. the expected $498 million). But despite this massive beat, the stock still trades at just 5 times forward earnings and 0.9 times sales. 

Above is a chart showing an undervalued company poised to build a new bull market. The stock price has been trading above both the 50-day and 200-day MAs, with the 50-day MA acting as support since mid-2024. Trump's tariffs briefly interrupted this trend, but the price quickly rose back above both MAs and appears to be balancing along the 50-day once again. The RSI is also back under 60 after a brief venture into Overbought territory, so another bounce off the 50-day would likely have strong upside momentum.

Tri-Pointe Homes Inc. 

Benzinga Edge Value Score: 95.14

Investing in homebuilders is a dicey proposition at the moment, considering the headwinds facing the construction industry. However, Tri-Pointe's TPH surprisingly strong Q1 2025 earnings indicate a resilient company capable of weathering economic turbulence. TPH posted EPS figures of $0.70 per share, easily exceeding the $0.45 per share estimate. The April report also triggered a momentum shift in the stock, which currently trades at just 8.9 times forward earnings and 0.65 times sales.

Like most homebuilders, TPH's shares couldn't shake downward momentum as high mortgage rates kept the housing market frozen. Housing is still struggling to gain traction (highlighted by this week's poor report in new home sales), but TPH has finally broken its downtrend, and momentum is slowly consolidating at a new support level. The RSI has been trending upward in unison with the stock price, giving more weight to the momentum shift. And with the RSI sitting at 57, the upswing likely has more room to run.

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