Forbes Advisor has put together a <a href="https://www.forbes.com/advisor/investing/best-small-cap-stocks/">list</a> of 10 promising small-cap stocks as of July 2024. All of the companies are profit-making, with their earnings expected to continue growing. They are financially healthy, and in some cases are trading at an extraordinary value.

Forbes Advisor names top 10 small-cap stocks

The historic surge in small-cap stocks over the past week is unsustainable, according to analysts at the UK’s Capital Economics, one of Europe's largest consulting firms, as well as Natixis Investment Managers Solutions, the investment division of France’s Groupe BPCE. Fundstrat, on the other hand, believes this is just the beginning of the rally.

Capital Economics and Natixis have doubts about sustainability of small-cap rally

Most investors have never heard of Perfect Corp., a developer of AI-based solutions for the beauty and fashion industries. Nevertheless, the company serves more than 400 of the world’s largest cosmetics brands, while its technologies are used by Instagram, Facebook, and Alibaba, and its apps have been downloaded by retail customers over a billion times, <a href="https://s27.q4cdn.com/906368049/files/News/2024/Zacks_SCR_Research_06202024_PERF_Thompson.pdf">according</a> to Zacks Small-Cap Research (Zacks SCR). Perfect Corp. dominates its niche, yet its shares are still undervalued, believe Zacks SCR analysts.

How Perfect Corp. cashes in on virtual makeup and pretty selfies

The growth of the Russell 2000 index of small-cap stocks over the last one month has roughly tripled that of the leading U.S. index, the S&amp;P 500. In the last four trading sessions in particular, the Russell 2000 has beaten the tech-heavy Nasdaq 100 by almost 11 percentage points, a feat not seen in 13 years. Investors have shown interest in small caps amid expectations of a Fed rate cut, the likelihood of which is perceived to have risen with inflation slowing.

Small caps triple S&amp;P 500 gains over last month

The first half of 2024 was the worst relative performance ever for small caps, with the Russell 2000 index of 2,000 small-cap stocks lagging the S&amp;P 500 index of the 500 largest stocks by approximately 13.5 percentage points.

Small caps have worst run ever in first half of 2024

Investors should take a closer look at display manufacturer Daktronics, as its shares are undervalued, Zacks analysts <a href="https://www.zacks.com/stock/news/2299942/is-daktronics-dakt-stock-undervalued-right-now?cid=CS-YAHOO-FT-tale_of_the_tape%7Cyseop_template_2-2299942&amp;t=DAKT">write</a>. The stock is <a href="https://finance.yahoo.com/quote/DAKT/">trading</a> at a P/E ratio of 18.88 (recall: the lower the ratio, the better), compared with the industry average, according to Zacks, of 23.74.

Zacks advises investors to consider display manufacturer Daktronics

Big Tech stocks plunged on Thursday, July 12, after unexpectedly positive inflation data came out. Investors began shifting capital from the Magnificent Seven to small-cap stocks, anticipating growth in the latter after a potential Fed rate cut in September, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-07-10/stock-market-today-dow-s-p-live-updates">reports</a>.

Investors shift from Big Tech to smaller companies in anticipation of Fed rate cut

Shares of Citius Pharmaceuticals, a developer of drugs for bloodstream infections, lymphoma, and hemorrhoids, surged over 10% on Wednesday, July 10. This came after the company <a href="https://citiuspharma.com/investors/news-media/news/release-details/2024/Citius-Pharmaceuticals-Details-Near-Term-Milestones-for-Late-Stage-Candidates/default.aspx">announced</a> that it had completed trials of one of its drugs and is close to commercially launching another. The company expects "strong momentum" if everything comes together. 

Investors like momentum of lymphoma drug developer

Finding undervalued stocks can generate substantial long-term profits for an investing portfolio, <a href="https://finance.yahoo.com/news/3-undervalued-gems-set-soar-113000363.html">notes</a> <strong>Yiannis Zourmpanos</strong>, an InvestorPlace contributor and the founder of the stock-market research platform Yiazou Capital Research. He has come out with three cheap stocks with potential for 1,000% growth by 2026. Recently, two of them have significantly boosted their gross profits and margins.

InvestorPlace contributor names three stocks set to soar 1,000% by 2026

Nonlethal weapons manufacturer Byrna Technologies has increased production to be ready for a potential pickup in demand should the upcoming US presidential election, scheduled for November 5, lead to unrest.

Nonlethal weapons manufacturer increases production ahead of US elections

Quotes on shares of fintech company DeFi Technologies <a href="https://finance.yahoo.com/quote/DEFTF/">rose</a> more than 3% on Tuesday, July 9. The gains followed the company’s announcement that it had <a href="https://www.binance.com/ru/square/post/2024-07-09-defi-technologies-acquires-otc-trading-platform-and-digital-asset-liquidity-provider-stillman-digital-10565964442009">agreed</a> to acquire Stillman Digital, a platform for over-the-counter (OTC) trading in crypto assets and liquidity provider.

Shares of fintech company DeFi Technologies rise after new acquisition

At the end of June, Super Micro, a manufacturer of data center equipment, was removed from the Russell 2000, a small-cap stock index. Investors should brace for the consequences of this move, as it was largely thanks to Super Micro that the Russell 2000 had been growing over the past year, a <a href="https://www.marketwatch.com/articles/smci-stock-price-russell-2000-d77f5cf9?mod=search_headline">report</a> points out.