Is Tactile Systems Technology (TCMD) Stock Undervalued Right Now?

The self-proclaimed “tariff man” is back at the helm of the United States of America. On Nov. 5, Donald Trump had a resounding victory to become the nation’s 47th president.

On Nov. 7, the Fed decided to reduce the benchmark lending rate by 25 basis points in its November FOMC meeting. This rate cut follows an aggressive 50 basis-point reduction in the Fed Fund rate in its previous FOMC meeting in September.

These two recent developments should benefit small businesses to a good extent. Here we recommend five small-cap stocks with a favorable Zacks Rank and solid upside potential in the short term. These are - Private Bancorp of America Inc. PBAM, MediaAlpha Inc. MAX, Tactile Systems Technology Inc. TCMD, Travelzoo TZOO and South Atlantic Bancshares Inc. SABK.

Trump Tariff to Boost Small Businesses

Since the onset of the COVID-19 pandemic in March 2020, small businesses have suffered a lot. During the pandemic, the main concern was demand, as social distancing resulted in a slowdown in U.S. consumer spending, which hurt this segment. The global breakdown of supply-chain systems and the shortage of manpower have affected these companies the most.

Donald Trump’s implementation of tariffs on foreign products is primarily aimed at strengthening U.S. industries by forcing companies to bring back jobs to the country. Small businesses have no geographical diversification and depend on U.S. consumers.

Imposition of tariffs on foreign products, especially those used as inputs to final products will make cheaper imported goods (particularly Chinese inputs) more costly. This will help indigenous small businesses to achieve a level playing field.

Rate Cut to Benefit Small Businesses

After the pandemic, the major issue for U.S. small businesses was galloping inflation. This space suffered significantly due to a higher interest rate regime. The companies operate on a thin profit margin, and most new businesses take time to achieve profitability.

Small businesses are unable to pass on the total hike in input costs to their final products, taking a toll on their financial condition. Small businesses are generally dependent on cheap sources of credit for their survival. Therefore, a gradual decline in the benchmark interest rate will help this space immensely.

Buy 5 Small Cap Stocks With Solid Upside in Short Term

These five stocks have strong growth potential for 2025 and have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks year to date.

Private Bancorp of America Inc.

Zacks Rank #1 Private Bancorp of America provides banking products and services to individuals and businesses in California. PBAM offers checking and savings, money market, certificate of deposit, sweep, zero balance, and individual retirement accounts, unsecured lines of credit, personal credit lines, and term loans, additional services, such as direct deposits, online banking, ATM and debit cards, credit cards, savings/line of credit overdraft protection, and safe deposit boxes; and certificate of deposit account registry services.

Impressive Short-Term Upside for PBAM Stock

Private Bancorp of America has an expected revenue and earnings growth rate of 11.1% and 5.6%, respectively, for 2025. The Zacks Consensus Estimate for 2025 earnings has improved 1% over the last seven days.

The average short-term price target of brokerage firms represents an increase of 28% from the last closing price of $49.99. The brokerage target price is currently in the range of $60 - $71. This indicates a maximum upside of 42% and no downside.

MediaAlpha Inc.

Zacks Rank #1 MediaAlpha operates an insurance customer acquisition platform in the United States. MAX optimizes customer acquisition in various verticals of property and casualty insurance, health insurance, and life insurance. MAX provides real-time programmatic technology platform specializing in vertical search and metasearch.

Astonishing Short-Term Upside for MAX Shares

MediaAlpha has an expected revenue and earnings growth rate of 30.1% and 82.5%, respectively, for 2025. The Zacks Consensus Estimate for 2025 earnings has improved 28.3% over the last seven days.

The average short-term price target of brokerage firms represents an increase of 113.9% from the last closing price of $11.71. The brokerage target price is currently in the range of $13 - $31. This indicates a maximum upside of 164.7% and no downside.

Tactile Systems Technology Inc.

Zacks Rank #1Tactile Systems Technology is a medical technology company which develops medical devices for the treatment of chronic diseases in the United States. TCMD’s product pipeline consists of Flexitouch System, the Entre System and the ACTitouch System. TCMD also provides Kylee, a mobile application to help patients learn about lymphedema, track their symptoms, and treatment

Robust Short-Term Upside for TCMD Stock

Tactile Systems Technology has an expected revenue and earnings growth rate of 10.1% and 33.1%, respectively, for 2025. The Zacks Consensus Estimate for 2025 earnings has improved 7.4% over the last seven days.

The average short-term price target of brokerage firms represents an increase of 45.9% from the last closing price of $15.26. The brokerage target price is currently in the range of $16 - $25. This indicates a maximum upside of 63.8% and no downside.

Travelzoo

Zacks Rank #2 Travelzoo is an Internet media company. TZOO engages in the provision of information to subscribers and website users about travel, entertainment and local deals available from companies. TZOO’s operating segment consists of Asia Pacific, Europe and North America.

Excellent Short-Term Upside for TZOO Shares

Travelzoo has an expected revenue and earnings growth rate of 14.1% and 8.7%, respectively, for 2025. The Zacks Consensus Estimate for 2025 earnings has improved 4.4% over the last 30 days.

The average short-term price target of brokerage firms represents an increase of 26.6% from the last closing price of $17.35. The brokerage target price is currently in the range of $17 - $35. This indicates a maximum upside of 101.7% and no downside.

South Atlantic Bancshares Inc.

Zacks Rank #1 South Atlantic Bancshares operates as the bank holding company for South Atlantic Bank which provides banking products and services to individuals and businesses. SBAK offers checking, money market and savings accounts, certificates of deposits, individual retirement accounts, health savings accounts and residential first mortgages, secured loans, home equity lines of credit, auto and recreational vehicle loans. SBAK also provides treasury, remote deposit capture, and merchant card services, telephone and online banking, ATM services, and debit and credit cards.

Strong Short-Term Upside for SBAK Stock

South Atlantic Bancshares has an expected revenue and earnings growth rate of 10.5% and 19.3%, respectively, for 2025. The Zacks Consensus Estimate for 2025 earnings has improved 10.3% over the last seven days.

The average short-term price target of brokerage firms represents an increase of 14.2% from the last closing price of $14.22. The brokerage target price is currently in the range of $16 - $16.25. This indicates a maximum upside of 14.3% and no downside.

Zacks Investment Research

Shares of Tactile Systems Technology (TCMD) have gained 3.1% over the past four weeks to close the last trading session at $14.62, but there could still be a solid upside left in the stock if short-term price targets of Wall Street analysts are any indication. Going by the price targets, the mean estimate of $21.33 indicates a potential upside of 45.9%.

The average comprises three short-term price targets ranging from a low of $16 to a high of $25, with a standard deviation of $4.73. While the lowest estimate indicates an increase of 9.4% from the current price level, the most optimistic estimate points to a 71% upside. More than the range, one should note the standard deviation here, as it helps understand the variability of the estimates. The smaller the standard deviation, the greater the agreement among analysts.

While the consensus price target is a much-coveted metric for investors, solely banking on this metric to make an investment decision may not be wise at all. That's because the ability and unbiasedness of analysts in setting price targets have long been questionable.

But, for TCMD, an impressive average price target is not the only indicator of a potential upside. Strong agreement among analysts about the company's ability to report better earnings than they predicted earlier strengthens this view. While a positive trend in earnings estimate revisions doesn't gauge how much a stock could gain, it has proven to be powerful in predicting an upside.

Here's What You May Not Know About Analysts' Price Targets

According to researchers at several universities across the globe, a price target is one of many pieces of information about a stock that misleads investors far more often than it guides. In fact, empirical research shows that price targets set by several analysts, irrespective of the extent of agreement, rarely indicate where the price of a stock could actually be heading.

While Wall Street analysts have deep knowledge of a company's fundamentals and the sensitivity of its business to economic and industry issues, many of them tend to set overly optimistic price targets. Are you wondering why?

They usually do that to drum up interest in shares of companies that their firms either have existing business relationships with or are looking to be associated with. In other words, business incentives of firms covering a stock often result in inflated price targets set by analysts.

However, a tight clustering of price targets, which is represented by a low standard deviation, indicates that analysts have a high degree of agreement about the direction and magnitude of a stock's price movement. While that doesn't necessarily mean the stock will hit the average price target, it could be a good starting point for further research aimed at identifying the potential fundamental driving forces.

That said, while investors should not entirely ignore price targets, making an investment decision solely based on them could lead to disappointing ROI. So, price targets should always be treated with a high degree of skepticism.

Why TCMD Could Witness a Solid Upside

There has been increasing optimism among analysts lately about the company's earnings prospects, as indicated by strong agreement among them in revising EPS estimates higher. And that could be a legitimate reason to expect an upside in the stock. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For the current year, three estimates have moved higher over the last 30 days compared to no negative revision. As a result, the Zacks Consensus Estimate has increased 10.9%.

Moreover, TCMD currently has a Zacks Rank #1 (Strong Buy), which means it is in the top 5% of more than the 4,000 stocks that we rank based on four factors related to earnings estimates. Given an impressive externally-audited track record, this is a more conclusive indication of the stock's potential upside in the near term. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here

Therefore, while the consensus price target may not be a reliable indicator of how much TCMD could gain, the direction of price movement it implies does appear to be a good guide.

Zacks Investment Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Elekta (EKTAY) is a stock many investors are watching right now. EKTAY is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 13.81, while its industry has an average P/E of 32.16. Over the last 12 months, EKTAY's Forward P/E has been as high as 25.06 and as low as 13.49, with a median of 15.99.

Investors should also recognize that EKTAY has a P/B ratio of 2.31. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 4.27. Within the past 52 weeks, EKTAY's P/B has been as high as 3.47 and as low as 2.23, with a median of 2.76.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. EKTAY has a P/S ratio of 1.35. This compares to its industry's average P/S of 2.94.

Finally, our model also underscores that EKTAY has a P/CF ratio of 10.66. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. EKTAY's P/CF compares to its industry's average P/CF of 25.45. Within the past 12 months, EKTAY's P/CF has been as high as 14.21 and as low as 10.12, with a median of 11.82.

Another great Medical - Instruments stock you could consider is Tactile Systems Technology (TCMD), which is a # 1 (Strong Buy) stock with a Value Score of A.

Additionally, Tactile Systems Technology has a P/B ratio of 1.79 while its industry's price-to-book ratio sits at 4.27. For TCMD, this valuation metric has been as high as 2.03, as low as 1.28, with a median of 1.69 over the past year.

These are only a few of the key metrics included in Elekta and Tactile Systems Technology strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, EKTAY and TCMD look like an impressive value stock at the moment.

Zacks Investment Research