Small-cap value mutual funds provide excellent choices for investors who are looking for bargain, i.e., stocks at a discount, with an impressive growth potential. Value mutual funds are those that invest in stocks trading at discounts to book value, have a low price-to-earnings ratio and high dividend yields. Value investing has always been popular, and for a good reason. After all, who doesn’t want to find stocks with low PEs, solid outlooks and decent dividends?

A small-cap fund is a good choice for investors with a high risk appetite as companies with small market capitalization are expected to have a higher growth potential than large- and mid-cap companies. Small-cap funds generally invest in companies having market cap lower than $2 billion. Also, small-cap funds are expected to provide diversification across sectors and companies.

Below we share with you three top-rated, small-cap value mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of all small-cap value mutual funds, their Zacks Rank and past performance.

T. Rowe Price Small-Cap Value (PRSVX - MF report) invests the majority of its assets in companies with market capitalization within the range of the Russell 2000 Index. PRSVX may also invest in securities of companies located in foreign lands. Further, PRSVX may choose to sell its securities to restrict losses and reallocate assets in other securities with higher prospects. T. Rowe Price Small-Cap Value has a three-year annualized return of 7.5%.

J. David Wagner is the fund manager of PRSVX since 2014.

Perkins Small Cap Value A (JDSAX - MF report) seeks capital appreciation. JDSAX invests a large chunk of its assets in common stocks of undervalued small-cap companies. JDSAX invests in securities of companies with market capitalization similar to those listed on the Russell 2000 Value Index. The fund may invest a maximum of 20% of its assets in cash or equivalents. Perkins Small Cap Value A has a three-year annualized return of 9.3%.

JDSAX has an expense ratio of 1.03% as compared to the category average of 1.4%.

Nuveen NWQ Small/Mid-Cap Value A (NSMAX - MF report) invests the majority of its assets in companies with market capitalization within the range of the Russell 2500 Value Index. Though NSMAX invests in both small and mid-cap companies, it currently has major parts of its assets invested in small cap stocks. NSMAX invests a maximum of 35% of its assets in foreign companies with not more than 10% of its assets allocated in companies from emerging economies. Nuveen NWQ Small/Mid-Cap Value A has a three-year annualized return of 5.8%.

As of July 2016, NSMAX held 50 issues with 4.63% of its assets invested in Coherent Inc. (COHR)