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These 2 small-cap stocks are on sale! I’d buy them in an ISA today

It’s not a mystery why small-cap STV Group (LSE: STVG) shares have plummeted of late.

The broadcaster, like its FTSE 100 cousin ITV, faces a significant drop-off in ad revenues during what will likely prove a painful and prolonged UK recession. Indeed, in March STV declared that previous guidance for regional ad sales to rise by single-digit percentages in 2020 looks “challenging”.

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That’s likely to prove something of an understatement. However, STV’s variable broadcast cost base gives it some protection in these tough times. Programming costs account for the lion’s share of total costs. These are costs that tend to move in line with broader advertising revenues. This will help it defend margins in these difficult times.

Small cap, big value

But let’s look beyond the medium term. Like ITV, the Scottish broadcaster is benefitting from changing viewer habits and the move to online. It’s a reflection of the huge investment STV has made in its online capabilities, too. Online viewings of STV’s output surged 80% in the first quarter, picking up the pace from a blockbuster 2019 and helped by the broadcaster taking steps like releasing exclusive content through its streaming services and making its programmes available on new platforms like Apple TV.

This is a small cap that is clearly going places. And current troubles in the ad market represent nothing more than a mere bump in STV’s broader growth story. It currently trades on a forward price-to-earnings ratio of below 8 times, making it a brilliant value pick at current prices of around 240p per share.

Another one to watch

Tyman (LSE: TYMN) is another small cap that looks too cheap to miss today. It hasn’t had the best of things lately, as Covid-19-related lockdowns have smashed revenues (down 39% in April alone) and its factories in Europe have been shuttered. It also faces a slump in demand for its door and window components as a painful global recession will likely hammer construction companies across its territories.

Subsequent share price weakness means that, at current values of 195p per share it trades on a prospective P/E ratio of 10 times. I reckon this represents an attractive level to buy in at.

Tyman has been no stranger to difficult underlying market conditions in recent times. But it has shown that it is capable of outperforming the broader market. It has also proved successful in cutting costs. Both qualities should stand it in good stead for the coming recession.

This sales resilience also reflects Tyman’s active approach to M&A across its US, UK, and European territories in recent years. Its success on the acquisition front has boosted its product portfolio and its route to markets, not to mention building its presence in commercial markets along with boosting its existing position in the residential segment. Such investments should put it near the front of the queue when the upturn in its end markets finally transpires.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.