Every investor wants to win big. And sometimes that means making a riskier play in small-cap stocks. Some small businesses today are tomorrow’s biggest enterprises, and so early investing in these firms could mean massive wealth over time.
But, of course, finding tomorrow’s enterprises is the hard part.
Small-cap businesses are typically defined as anything with a market cap over $300 million but under $2 billion. There are, literally, hundreds of these sized businesses out there. Often they are at the early stage of the business life-cycle, and therefore some will never make it, and others will remain small for their entirety. All-in-all, choosing the right stocks can be tough.
Yes, small-cap stocks tend to be volatile and, therefore, risky. However, having a variety of them in your portfolio increases your chase of finding tomorrow’s enterprise.
Here are two that investors should check out. Could these be the next big companies?
Small-Cap Stocks: Is OrganiGram the Next Cannabis Enterprise?
Canada’s OrganiGram Holdings (TSXV:OGI) (NASDAQ:OGI) operates within the hottest investing sector right now—cannabis. The climate has created the opportune time to invest: Canada legalized the drug recreationally last October and will soon legalize cannabis derivatives too. Further, in the US, a number of states have legalized medical marijuana with a select few also legalizing recreational marijuana. Then in late 2018, President Trump signed the updated Farm Bill, which legalized industrial hemp production.
In light of this, the cannabis industry now shows massive growth potential like no other, and this means big potential for small-cap stocks like OrganiGram.
With a market capitalization of $1 billion and shares selling for $8.23 CAD on the TSXV, OrganiGram has already become one of Canada’s largest cannabis producers. Sitting firmly in the top 10 in terms of production capacity, OrganiGram Holdings is already doing what so few have managed to—turn a profit.
In its most recent quarter, it returned $12.5 million in net income from continuing operations year to date on revenue worth $64.1 million.
One of the reasons the company has achieved this is a cost-effective cultivation technology that allows it to scale production and keep the cost-price per gram down. This technology is an indoor, three-tiered, growing facility, meaning it utilizes space for a fraction of the cost when compared to massive cultivation acreages.
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By the end of 2019, the company expects to increase annual capacity to 113,000 kilograms.
Shares have already packed on 45% year-to-date. But there is much more potential ahead. The company is expanding its international footprint and has its sight firmly set on the US’s lucrative hemp opportunities.
Small-Cap Stocks: Could Tucows Soar?
Also hailing from Canada, Toronto’s Tucows (TSX:TC) (NASDAQ:TCX) could make investors rich. The company provides a variety of internet services that range from fiber-based data service plans to domain name registration. It sounds straightforward enough at first, but there’s one big potential under the surface here.
Currently, Tucows has a market cap of $560 million, and shares sell for $51.05 USD. According to analyst Anders Bylund: “Tucows arguably deserves a richer valuation right now, and its growth prospects also look stellar.”
The reasons for his evaluation is the growth in top-line sales. Tucows has “grown its top-line sales by an annual average of 22% over the past five years, pushing earnings higher by an average of 38% in the same period.”
Further, analysts expect annual earnings growth to remain near the 30% mark in the next five years. The reason the company is in demand comes down to its Ting Mobile wireless service. Tucows is the operator behind Ting Mobile. The company leases network access from major communication companies and offers the service at a cheaper rate. For this reason, Ting has almost tripled in the last five years, and at its current running rate, this growth is likely to continue.
Aside from Ting, Tucows has started to provide fiber-optic broadband services in a handful of handpicked markets. Bylund continues: “Ting Internet is an expensive expansion right now but could turn into a veritable cash machine as it matures.”
The company is still in the early stages of its life cycle. The potential for this small-cap stock to soar is palpable as Ting continues to grow.
Do you have any small-cap stocks on your radar that might be the next market leaders? What are your thoughts on OrganiGram Holdings and Tucows?
Let us know!
Featured Image: DepositPhotos © GaudiLab
