Is Gray Television, Inc. (NYSE:GTN) the Small Cap Stock with the Highest Upside Potential?

We recently created the list of 8 Best Small-Cap Stocks with the Highest Upside Potential According to Analysts, and Gray Television ranks among them. You can visit it here.

Though Gray Television, Inc. (NYSE:GTN) ranks 3rd in our list of the 8 Best Small-Cap Stocks Ready to Explode According to Analysts, we have analyzed the stock in detail.

Small-cap stocks are companies that have a market capitalization falling between $300 million and $2 billion.

We’ve often seen these smaller enterprises outshined by their large-cap counterparts, also because stocks like Google, Apple, Amazon etc. are known for their power to move entire markets. But it doesn’t mean that these small-cap stocks cannot present some golden opportunities for investment.

Small-cap stocks started gaining momentum during the last quarter of 2023, driven primarily by the AI-led rally that pushed the entire stock market high, thus putting away any immediate worries of an upcoming recession. According to Julius Baer, a private banking company based in Zurich, small-cap stocks have proven to, in fact, even outperform their larger-cap counterparts over very long periods. The report mentions that a dollar invested in US large-caps in 1926 grew in value to $5,767 by the end of 2018. Meanwhile, a single dollar invested in small-caps instead would have been worth a whopping $38,842 – almost seven times more.

However, what really makes these stocks attractive to investors is their potential for high returns. We will much more often see companies doubling their market capitalization from $1 billion to $2 billion, than let’s say from $1 trillion to $2 trillion. Small-caps tend to be fast-growing companies that can take more chances and respond to events and trends more efficiently than larger companies. Moreover, a recent analysis by MorningStar has revealed that small-caps look cheaper now relative to the broad market than at any time in the last 20 years.

But, of course, higher returns come with higher risks. Small-caps are highly vulnerable to macroeconomic factors and are thus more prone to market fluctuations, simply because they don't possess the same financial power as larger corporations, making it hard for them to survive unexpected emergencies. Additionally, these companies often have fewer outstanding shares, can’t borrow money as easily as bigger companies, and are more likely to have negative cash flows, leading to them paying lower or no dividends. They are also usually covered by fewer analysts and thus come with limited transparency and data for individual investors.

According to Marcio Silveira, a CFP, former equity analyst, and owner of Silvergreen Sustainable Investments:

“Since the 2010s, we’ve had some changes in how the economy works. All the top companies are tech companies now, and small-caps are underperforming because they can’t compete with these mega winner-take-all companies. You can find great opportunities in individual small-cap stocks, but you need to do a lot of fundamental analysis to find the hidden gems”

Gray Television, Inc. (NYSE:GTN)

Upside Potential as of May 21st: 97.58%

Market Cap: $634.29 million

Gray Television, Inc. (NYSE:GTN) describes itself as the largest owner of top-rated local television stations and digital assets in the United States. The company currently owns and/or operates television stations and leading digital properties in 113 television markets that collectively reach approximately 36% of American TV households.

In the first quarter of 2024, GTN reported a total revenue of $823 million, up 3% from the same quarter last year. The company’s net income attributable to common stockholders was $75 million, a significant improvement compared to a loss of $44 million in the first quarter of 2023. It was reported on the 20th of May that the television broadcasting company intends to offer up to $1 billion worth of senior secured first lien notes due 2029 to qualified institutional buyers.

Gray Television, Inc. (NYSE:GTN) is a strong dividend payer in the market, returning capital to shareholders consistently since 2021. Among the 23 hedge funds that held shares of GTN at the end of Q4 2023, Darsana Capital Partners boasted the largest stake of over 5.24 million shares, valued at $33.13 million.

 

Gray Television, Inc. (NYSE:GTN) has the 3rd highest upside potential on our list. To see the rest of the rankings, visit 8 Best Small-Cap Stocks Ready to Explode According to Analysts.

 

If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

Disclosure: None. This article is originally published at Insider Monkey.