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This Week's Bonus Content
3 Bargain-Cheap Small Caps Worth a Second LookBy Chris Markoch. Originally Published: 4/9/2026. 
Key Points
- Low P/E stocks can signal value, but finding catalysts is the key to unlocking upside.
- Many low P/E stocks are small-cap names, which may outperform if a broader market rally takes hold.
- Each stock offers a different bull case: biotech growth, dividend recovery, and energy momentum.
- Special Report: Elon Musk: This Could Turn $100 into $100,000
The price-to-earnings (P/E) ratio is a commonly used metric that provides a snapshot of a company’s valuation. The average P/E ratio of stocks in the S&P 500 is around 27x. Any stock with a ratio below that level may offer value relative to its earnings. To be considered a "low P/E stock," a P/E ratio is usually between 5x and 12x. Many of the stocks that meet that threshold tend to be smaller companies that fly under the radar of institutional investors.
Goldman Sachs and Morgan Stanley now both warn that stocks face a 'Lost Decade' through the 2030s - meaning near-term gains could be erased by recurring crashes. Since 2024, markets have absorbed an $8.5 trillion yen-trade shock and an $11 trillion tariff-driven collapse.
Keith Kaplan, Head of Financial Technology at MarketWise (Nasdaq: MKTW), says there is still time to adapt. His team's latest breakthrough is designed to help investors protect and grow their portfolios without options, bonds, or crypto - even if markets deteriorate further. Try the new trading approach free and see if it fits your portfolio
This may be a good time to consider low P/E small-cap stocks. Many analysts believe small caps could perform well if there’s a broader market rally. Sometimes a low P/E ratio signals a fundamental problem with a company’s business. With the right catalysts, however, it can be an opportunity to accumulate shares of companies whose growth prospects may be overlooked. This article examines three small-cap stocks with low P/E ratios and the reasons investors may want to give them a closer look. Innoviva—A Biotech With Royalties, Drugs, and a 51% Upside CaseMany biotechnology companies are small-cap stocks because they are often clinical-stage firms without commercially available drugs. When a company does commercialize a therapy, the stock can move higher quickly. That could be the case with Innoviva Inc. (NASDAQ: INVA). The company is somewhat unique among biotech firms thanks to a three-part business model: stable, high-margin royalties from respiratory drugs developed with GSK (NYSE: GSK); the development of specialty therapeutics focused on critical care and infectious diseases; and a portfolio of strategic healthcare investments. Innoviva has shown strong year-over-year revenue and earnings growth. More significantly, the company is becoming less reliant on royalty revenue, which decreased to 60% of revenue from 72%. That said, the company recorded a one-off gain of approximately $161 million in 2025 that boosted net income. That non-recurring gain is why analysts project a 42% decline in earnings in 2026 before growth resumes in 2027. Despite the projected drop, analysts have a consensus price target of $34.80 on INVA, which would represent about 50% upside. Wendy’s—A High-Yield Dividend Play Waiting for the Consumer to Come BackWendy’s (NYSE: WEN) may be an example of a stock that’s "so bad it’s good." The company reported disappointing results in February, highlighted by an alarming decline in same-store sales, according to an earnings report. Like many restaurant chains, Wendy’s has suffered as consumers dine out less. Even affordable fast-food restaurants are under pressure as customers seek healthier options or alter behavior in response to GLP-1 drugs. The company is taking action where it can, closing underperforming restaurants while showing solid international growth — a bright spot for investors. Another potential positive is the company’s dividend. That yield of over 8% requires context, however. Simply put, the yield is elevated because the stock is down, not because the payout was raised. Whether that dividend holds depends on factors that may be outside the company's control. Having said that, the dividend seems to be supported, for now. If the economy improves and the company’s target consumers regain purchasing power, accumulating WEN at current levels could compound returns over time. Nabors Industries—An Oil-Driven Momentum Trade With an Earnings Catalyst AheadNabors Industries (NYSE: NBR) is an example of investors following momentum. The oil and gas drilling services company's stock has rallied in 2026 alongside many energy stocks, with gains accelerated by the recent rise in oil prices. Investors may wonder whether it’s sensible to chase NBR higher. Analysts have raised price targets, but even the highest targets leave limited upside from current levels. That makes Nabors a more speculative pick in this group, with the near-term outlook hinging on earnings. The company is scheduled to report in late April. By then, there may be more clarity about tensions in the Strait of Hormuz. If the standoff continues, oil prices could remain elevated. Even if there is a resolution, markets may take time to reset, and demand for oil has other catalysts beyond the conflict in Iran. That said, oil prices could retreat as quickly as they rose. As a momentum trade for the next quarter, NBR could be an attractive, though speculative, choice. |
