International value stocks may be having their day right now, but that doesn’t mean investors can’t unearth some outstanding value stocks in the U.S. In an interview with Hedge Fund Alpha, Sonu Chawla of TimeSquare Capital Management wrote about JFrog (FROG) and Carpenter Technology (CRS).
TimeSquare is a niche, boutique asset manager that targets small- to mid-cap growth stocks. With $8.0 billion in assets under management, the firm’s team looks for high-quality names with strong management teams in what they see as inefficient market-cap ranges. Chawla’s strategy covers $4.65 billion of TimesSquare’s AUM.
JFrog Ltd (NASDAQ:FROG)
JFrog is the developer of a software supply chain platform that provides end-to-end visibility, security and control for the automation of delivering software releases. Chawla was initially drawn to the company by her deep customer due diligence work, which indicated that it provides a compelling value proposition for customers and is considered a strategic and mission-critical vendor.
According to Chawla, JFrog will benefit from the continued rollout of artificial intelligence.
“JFrog’s centralized platform for software-module management stands to benefit from the growing demand for cloud-based enterprise applications, development tools and security,” she explained. “Greater artificial-intelligence adoption should push up the number of enterprise applications and support new digital services, likely boosting workloads for JFrog. AI could also increase the risk of bad actors and drive demand for JFrog’s security tools.”
More to like about JFrog
Chawla also said the company is expanding its TAM, and customers like the wider use cases it is rolling out to address areas in security, AI and compliance. She believes the opportunity exists because JFrog, as a small-cap stock, remains underfollowed. Additionally, investors are still skeptical about whether the company can penetrate security budgets controlled by the chief information security officer. On the other hand, Chawla sees positive signals from their boots on the ground. She’s set a target price of $78 a share for JFrog.
“We believe 2026 Street estimates for JFrog are too low, and the consensus does not appreciate enough the incremental idiosyncratic contribution from the company’s new security products, nor the potential contribution from increased AI-driven usage,” Chawla added.
Carpenter Technology Corp (NYSE:CRS)
Carpenter Technology is a manufacturer, fabricator and distributor of more than 500 high-performance specialized alloys used for essential components in the aerospace, defense, power, and medical devices industries, among others. Almost two-thirds of Carpenter’s net revenues, excluding surcharges, comes from the aerospace and defense offerings.
Chawla was drawn to Carpenter because of its strong pricing power, robust growth profile, solid margins, and sizable valuation discount compared to its largest customer, HWM. She feels Carpenter uniquely sits at the crossroads of the ramping aerospace production and accelerating natural gas turbine demand.
“Demand for CRS’ products is poised to outstrip supply through the end of the decade,” Chawla explained. “The specialty aerospace alloys industry was effectively sold out in 2019, and build rates for Boeing’s and Airbus’ programs will climb to levels 30-35% above 2019 highs by the end of the decade. Capacity simply cannot catch up with demand in time to fulfill these build rates; greenfield capacity additions in this industry can take up to 10 years to install and qualify. Process knowledge, capital intensity and very lengthy qualification timelines present high barriers to entry.”
More to like about Carpenter Technology
As a result, she believes Carpenter has strong pricing power and will retain customers. Chawla added that alloys account for a low percentage of an aircraft’s overall cost, which provides the company with continued runway for upside in pricing. She believes HSD/ LDD pricing will last for the coming years amid ramping demand in both the aerospace and energy sectors, which should boost Carpenter’s earnings.
Chawla also sees the potential for a sizable re-rating of the company’s stock as its financial metrics converge with those of its largest customer. She has set a price target of $378 a share for Carpenter.
“This opportunity exists because the sustainability of CRS’ pricing power is underappreciated,” Chawla added. “We do not believe it is widely understood that limited specialty alloy capacity may hinder the ability for Boeing and Airbus to hit desired ‘full production’ rates, and CRS may find itself in one of the most favorable positions of pricing leverage within the aerospace supply chain.”
