2 Outperform Microcaps that Look Undervalued

Here we highlight 2 stocks from our microcap research universe that appear undervalued based on recent operating momentum and supported by 5-year valuation analysis.

Texas Community Bancshares, Inc. (TCBS) is a bank holding company headquartered in Mineola, Texas. The company conducts all of its operations substantially through its wholly owned subsidiary, Broadstreet Bank, a Texas-chartered savings bank.

Texas Community Bancshares, Inc. (TCBS) operates primarily in East Texas through its main office and six branch locations serving Wood, Van Zandt, Smith, Franklin, and Hopkins counties and surrounding areas.

In Q2, EPS grew 52% YOY to $.35 primarily due to loan and deposit growth accompanied by YOY NIM improvement of 60 bps to 3.69%. Noninterest-bearing deposits increased to $51.3 million from $45.9 million, reducing reliance on costlier wholesale funding.

Please note that NIM in Q3 of 2025 was 3.22% while NIM for all of 2025 was 3.26%, so YOY NIM improvement for the next 2 quarters appears possible.

The stock is currently trading at 0.89X trailing 12-month P/B TTM, which compares to 1.82X for the Zacks sub-industry, 4.42X for the Zacks sector and 7.29X for the S&P 500 index.

Over the past five years, the stock has traded as high as 1.07X and as low as 0.60X, with a 5-year median of 0.90X. There are currently no intangible assets on the balance sheet.

We believe there is room for multiple expansion. FHLB borrowing exposure and increased credit stress are the main risk factors.

The other microcap valuation play takes us into the world of coffee. Is coffee demand inelastic? There is academic research to support this beyond just our anecdotal coffee addiction.

Coffee Holding Co., Inc. (JVA) is an integrated wholesale coffee roaster and dealer engaged in sourcing, roasting, blending, packaging and distributing coffee products, including wholesale green coffee, private label coffee and branded coffee.

It’s important to note that Coffee Holding Co., Inc. (JVA) strategically elected not to pass on tariff costs back in 2025. This enabled customer retention as well as new customer acquisition.

Even though the July Q3 sales declined 9.3% due to lower selling prices, operating income increased to $2.3 m YOY from ($1.1 m) as Gross Margin improved to 25% from 9.4%.

Trading gains, tariff refunds, and lower priced inventory contributed to the improvement of Gross Margin. The company expects additional tariff refunds over the next 2 quarters.

The stock is currently trading at 3.35X trailing 12-month EV/EBITDA TTM, which compares to 21.03X for the Zacks sub-industry, 34.88X for the Zacks sector and 18.22X for the S&P 500 index.

Over the past five years, the stock has traded as high as 22.28X and as low as -32.74X, with a 5-year median of 6.65X.

As a testament to possible undervaluation, the company recently announced a share repurchase for $2.5 m which equates to nearly 10% of its market cap.

Customer concentration and a volatile commodity market are the primary risk factors.
 

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This article originally published on Zacks Investment Research (zacks.com).

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