International small-cap stocks have rebounded strongly, approaching record levels following a first-quarter adjustment. Despite a relatively stable U.S. dollar over the past 12 months—down just one percentage point—the Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) delivers impressive results.
Strong Performance and Outperformance
VSS has returned over 44% year-over-year, outperforming the Vanguard Total Stock Market ETF (VTI) by seven percentage points. This resilience highlights the appeal of international small caps amid shifting currency dynamics.
Compelling Valuation Metrics
Analysis reveals a forward P/E ratio of 12.8x for VSS, supported by 9.24% earnings per share growth. The price-to-earnings-to-growth (PEG) ratio remains attractive below 1.3x, signaling undervaluation and growth potential. These metrics justify a buy recommendation for investors seeking international exposure.
Diversified Exposure and Income
VSS provides broad access to global small-cap markets outside the U.S., featuring a 3% dividend yield. Momentum remains robust, with leading sectors including Industrials and Materials driving gains and enhancing diversification.
Bullish Technical Indicators
Shares trade near all-time highs, backed by a rising 200-day moving average. Seasonal trends favor April through July, further supporting upward momentum for international small caps.
