Small-cap stocks are generically valued somewhere between $300 million and $2 billion. As such, they are smaller companies, usually in the earlier stages of a business life cycle. Because of this, there is a greater risk associated when investing as operations are smaller and budgets tighter. This is often a highly- speculative market so investors should tread carefully.
But the reason, so many investors want to back a small-cap stock is the potential of growth from this small base. The right company at the right time can give massive returns to investors in the long run if they get their business formula right.
So let’s check out some small-cap companies that look to be moving the right way.
Small-Cap Stocks To Watch – Who Should You Know?
TPI Composites (NASDAQ:TPIC)
We are in a green-energy trend and all eyes are on this sector. But often those that are building the equipment to help utilities generate cleaner energy are overlooked. TPI Composites fits into this category. This company offers investors as much potential to benefit from the sector as any straight-up energy generator.
The company makes composite wind blades for wind-energy generation. It already has a customer base that comprises of “nearly half of the global onshore wind-energy market.” It counts major brands such as General Electric, Siemens and Vestas as key customers.
TPI’s market cap has already more than doubled to $1 billion in just three years. But where investors should get excited is that the growth catalysts are certainly there for this trend to continue:
– Annual wind capacity is expected to grow at a compound annual rate of 8.2% until 2027
– TPI aims to double its wind-blade sales by 2021. This is a very real possibility as the company expands on its existing multiyear supply agreements and “an ever-growing order book”.
– Further, in the last quarter, TPI’s contract value hit a record high of $6.8 billion. What this means, is that this is the potential revenue investors can expect from now until 2023 based purely on its existing contracts.
For $22.56 USD on the NASDAQ exchange, these small-cap stocks are by no means “cheap” but they offer investors a lot to think about and huge potential for down-the-line growth.
HealthStream – (NASDAQ:HSTM)
HealthStream currently has a market cap of $810.02 million. It is a small company but a dominant one none-the-less. Operating in the lucrative health care training sector, it offers in-classroom and online training for medical and emergency services personnel. Its customer base includes nurses, physicians, and first responders.
The company also trains pharmaceutical and medical technology sales reps.
According to Forbes:
“Spending on these services generally is not considered discretionary, as continuing education and accreditation are mandated by both state and federal governments, making HealthStream a good play in a downturn”
And looking at the company’s chart, these downturns do come. In the last 5 years, the highs have hit just above $30 and the lows staying above $20. For $25 on the NASDAQ at present, we might be in the midst of a lull right now. Assuming the trend continues, these small-cap stocks could climb back up to over $30 soon.
These shares look attractive in the long-run too—for a healthy buy-in price, there is a lot of potential down the line. For now, that shoot above the $30 mark could be imminent.
Hawkins (NASDAQ:HWKN)
With a market cap of $368.42 million, Hawkins is a tiny company that is very specific in its venture. It makes, and distributes a “variety of specialty chemicals from acids to salts”.
The company runs two arms of its business. The first is industrial chemicals which account for nearly three-quarters of all its sales. The second is a water-treatment arm which makes up the final quarter. Though smaller, this is the more profitable sector; showing gross margins of 29% versus industrial’s 17%, according to Forbes.
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The publication goes on to say that shares could hit a “$45 share price. And the 2% dividend yield does not hurt while you wait”.
For $34.49 USD at present, these small-cap stocks are in the midst of a downturn. HWKN shares climbed above $42 at the beginning of the year, and now, look poised for another bull run. The company has racked up positive cash flow for the past 10 fiscal years. Further, it has no debt and over $23 million in cash.
It’s probable that the current downtrend is the result of the trade tensions between the US and China; the knock on damages across all sectors has been clear.
The Take-Away
These small-cap stocks have been on our radar of late but nothing is a sure thing. Always be vigilant when investing, especially in the ever-volatile market that is smaller company’s. There are a lot of potential plays out there and investors can win big if they do their due diligence and research first.
Good luck hunting those small-cap stocks!
Featured Image: Deposit Photos/ra2studio
