A couple tough quarters put the kibosh on Meritage Homes (NYSE: MTH) in 2015. After soaring 39% to almost $50 a share the first few months of the year, the stock of this prominent homebuilder gradually sank back to around $34, ending the year with about a 6% loss.

Still, this makes Meritage one of 2016’s best small-cap values, as Wall Street’s recent pummeling of the firm is a gross over-reaction to short-term obstacles.

One was last year’s unusually wet spring and summer in key markets such as Dallas, Houston and Denver. Because of torrential rains, Meritage fell behind on many new construction projects in these areas. Transient labor shortages have hindered work in some markets, too.

As COO Phillippe Lord pointed out during the third-quarter conference call on October 29th:

Sale-to-close cycle times have stretched out by weeks or months, discouraging some buyers who are not willing to wait that long for a new home to be delivered.

Yet weather and labor-related issues didn’t impede third-quarter performance nearly as much as you’d think, considering the market’s recent treatment of Meritage. While the firm missed on profits, reporting $0.73 a share versus the consensus projection of $0.79, quarterly revenue of $670 million beat forecasts by $30 million.

CEO Steven Hilton had plenty of other good news to report, as well. For example:

Our third-quarter results reflect strong order growth in our east and west regions this year, which drove a 21% increase in our third-quarter home closing revenue. I am pleased we were able to deliver more than 1,700 homes to our customers during the quarter despite encountering headwinds from labor shortages and weather-related challenges in some of our markets.

Hilton wasn’t discouraged that the gross margin on home closings had fallen somewhat in the third quarter, thanks to higher construction costs resulting from labor shortages.

We expect to see our margins increase over the next 12 to 18 months as we improve the margins in our East region, made up primarily of new markets we have entered in recent years, which have not yet achieved anticipated operating efficiencies. We finished the third quarter with 250 actively selling communities—more than we have ever had in our 30-year history, which positions us for additional growth in 2016.

The longer-term also looks promising for Meritage, based on analyst consensus for profits to compound at a solid 7% pace in coming years against the backdrop of a steadfast U.S. economy. Per-share cash flow that exceeds earnings per share is a compelling sign of the firm’s ability to generate robust profit growth. So with a valuation of only around 9 times 2016 estimates, its stock is clearly a huge bargain.

Around the Roadrunner Portfolios

Momentum pick Hill-Rom Holdings (NYSE: HRC) had a relatively slow 2015, rising “only” about 7% after jumping 47% in 2013 and 12% in 2014. But this year, we see it regaining double-digit growth potential.

Hill-Rom continues to expand steadily beyond its roots as a manufacturer of hospital beds and furniture made with patient safety in mind. The latest step in the firm’s evolution, a $2.1-billion buyout of medical device maker Welch Allyn in early September, quickly made it a force in several new product categories.

Among them: blood pressure cuffs and other patient monitoring devices, diagnostic tools like electrocardiographs and lighting designed specifically for medical procedures. Such offerings nicely broaden Hill-Rom’s product portfolio, which has also grown to include wound care systems, surgical equipment and devices that help clear the lungs.

Management didn’t see Welch Allyn adding much to Hill-Rom’s performance right off the bat, but the latest earnings release shows an immediate contribution. Despite only being part of Hill-Rom the final few weeks of the fiscal year ended last September, Welch Allyn kicked in revenue of $50 million, almost 9% of the fourth-quarter total of $574 million. It also contributed to more than a 2% gain in the operating margin.

CEO John Greisch stressed Welch Allyn’s importance during the November 5th conference call:

Strategically, our acquisition of Welch Allyn is a significant step in our journey to build a stronger, more diverse portfolio with compelling solutions for our customers. It is early days, but the cultural integration and financial performance are both ahead of expectations. The Welch Allyn acquisition is a perfect example of what we need to do to execute the strategy we laid out at our Investor Conference—that is, establishing Hill-Rom as a premier partner to global healthcare systems by providing differentiated solutions to our customers and patients.

Hill-Rom’s fiscal 2016 guidance includes at least a 16.7% increase in profits to $3.08 per diluted share. Management also expects operating cash flow to increase about 40% to $300 million.

As a maker of coatings, tapes, adhesives and sealants for industrial use, Chase Corp. (NYSE: CCF) may not be the world’s most glamorous company. But we’re very excited about its stock, up more than 20% since joining the small-cap momentum portfolio a year ago.

Chase finished its 2015 fiscal year in impressive fashion, with the latest earnings report showing gains of 6.4% and 16%, respectively, in fourth-quarter revenue and diluted earnings to $61 million and $0.87 per share. Adjusted EBITDA rose 16.8% to $16.0 million for the quarter.

In a press release, CEO Adam Chase identified a key growth driver:

We had a positive finish to our fiscal year driven primarily by the Construction Materials segment’s year-over-year performance. It was nice to see a fourth quarter recovery in seasonal demand for both domestic pipeline maintenance coatings and bridge and highway waterproofing products after a slow start.

For the whole year, Construction Materials grew revenue 13.2% to $61.5 million. The segment now accounts for 26% of Chase’s top line versus 24% in fiscal 2013.

The Industrial Materials segment, which mainly makes tapes and other protective coverings for the electronics and telecommunications industries, remains by far the largest revenue source, though. In fiscal 2015, the segment took in $176.6 million, or 74% of the full-year total. While slower-growing, it still expanded by a healthy 4.1%.

A convincing sign fiscal 2016 will be another good year for Chase: As of October 31, the firm had a robust order backlog of $12.7 million, not far off its average year-end backlog of $13.5 million over the past decade.

With a trailing P/E ratio of only 14.5, Chase is exceptionally affordable for a growth stock. Yield hounds will also appreciate its reliable dividend, which rose 30% in fiscal 2015 to the current $0.65 a share and more than tripled over the past five years.

Key insiders have been boosting their positions in California-based water utility SJW Corp. (NYSE: SJW), a holding in our own small-value portfolio for about nine months. In December, insiders bought 23,000 shares worth nearly $650,000 at the time of purchase. At year end, insider ownership totaled nearly 1.5 million shares with a market value of nearly $45 million.

Although insiders aren’t required to disclose the rationale for their trades, in the case of SJW they were likely taking advantage of a recent opportunity to buy on the dip. The firm’s stock headed south after the latest earnings release, which showed year-over-year decreases in third-quarter revenue and net income of 34% and 75%, respectively. Revenue and profits were down significantly over the prior nine months, too.

These declines weren’t SJW’s fault, though. As a regulated utility, its performance depends heavily on general rate case decisions, legal proceedings in which regulators determine how much the company can charge customers for water for the next three years. Third-quarter woes stemmed from SJW’s 2012 rate case decision, as the firm explained in its quarterly SEC filing:

The decrease in net income for the three and nine months ended September 30, 2015 was primarily due to a decrease in revenue as a result of the recognition of [$46.5 million] true-up revenue from the 2014 decision of the 2012 General Rate Case. On September 29, 2014, the [California Public Utility Commission] approved a surcharge to true-up the difference between interim rates and authorized rates…

During the third-quarter conference call, CEO Richard Roth added:

Despite the regulatory delay that has impacted earnings, the fundamental elements that drive our business and lead to sustained profitability remain strong. As evidence of SJW’s strong fundamentals…capital expenditure programs including the Montevina Water Treatment plant upgrade project are on track to add $108 million of capital improvements in 2015.

To help put SJW’s capital expenditure programs into perspective, please note that the company’s rate base has grown at a compound annual growth rate of over 8% since 2010.