Having a list of small-cap stocks with high growth potential is similar to uncovering hidden gems. These stocks offer significant upside potential for emerging sectors and innovative business models reshaping industries. Here, the focus is on companies and their compelling financial performances and strategic maneuvers. These fundamentals position them as standout investments in 2024. These companies hold solid fundamentals that may support the rapid expansion of their market capital.
Understanding these stocks goes beyond financial metrics; it’s about grasping the disruptive technologies, niche market penetrations, and strategic expansions driving their growth. Whether its pioneering role in genomic diagnostics or dominance in digital gaming, each company showcases unique strengths. These strengths allow these companies to capitalize on evolving consumer trends and market demands.
Those keen on maximizing returns in the small-cap space can greatly benefit from insights into how these companies leverage their strengths to seize opportunities in the health care, industrial and diversified REITs, interactive home entertainment, technology hardware, storage and peripherals, specialized finance, and distribution industries.
GeneDx (NASDAQ:WGS) prevails in genomic diagnostics. In Q1 2024, GeneDx conducted 16,592 tests, marking a remarkable 91% year-over-year (YOY) increase. This surge in testing points to growing demand for their advanced diagnostic services, which include a comprehensive analysis of genetic data to aid clinicians in making precise medical decisions. Financially, GeneDx has demonstrated robust performance with a significant expansion in adjusted gross margins, reaching 61% in Q1 2024 from 34% a year ago.
Moreover, the company reported a 96% YOY growth in revenue from exome and genome tests, totaling $44.0 million for the quarter. These financial gains highlight GeneDx’s effective monetization of proprietary genetic data assets and reflect its ability to capture a larger share of the genomic testing market. Such financial discipline positions GeneDx well on its path toward sustainable profitability.
Overall, GeneDx has high potential on the small-cap stocks list due to its expansion into higher-margin testing and strong revenue growth.
Newlake Capital Partners (NLCP)
Human hand stacking coins over a black background with hexagonal golden shapes. Concept of investment management and portfolio diversification. Composite image between a hand photography and a 3D back, ETFs
Source: Olivier Le Moal / Shutterstock.com
Newlake Capital Partners (OTCMKTS:NLCP) leads in cannabis real estate. The company had a solid increase in adjusted funds from operations (AFFO). The AFFO grew by 10.6% YOY to $11.0 million for Q1 2024. The company increased its quarterly dividend to $0.41 per share. The dividends are equivalent to an annualized rate of $1.64 per share, similar to the increase in Q4 2023. The pattern points to NewLake’s focus on returning value. A high and growing dividend yield is attractive to investors. Hence, these elements indicate financial stability and confidence in future cash flows from the portfolio.
Additionally, NewLake maintains a low leverage profile with only $4 million of debt outstanding against a credit facility that provides over $85 million in available funds until 2027. The facility carries an attractive interest rate, which minimizes financing costs and enhances profitability. This financial structure positions the company favorably to edge strategic investments and capitalize on growth opportunities in the cannabis real estate sector.
In summary, the AFFO growth and low debt profile solidify Newlake’s mark on small-cap stocks with high potential.
DoubleDown Interactive (DDI)
a room of slot machines in a casino to represent gambling stocks
Source: Shutterstock
DoubleDown Interactive (NASDAQ:DDI) capitalizes on social casino games. The company expanded through acquisitions like SuprNation. In Q1 2024, DoubleDown reported a total revenue of $88.1 million, marking a 13% increase from the previous year. This growth was driven by a $79.8 million contribution from its core social casino free-to-play games. The category saw a 3% YOY increase and an additional $8.3 million from SuprNation, the recently acquired iGaming business. This diversified revenue stream demonstrates DoubleDown’s ability to expand its market presence through strategic acquisitions. This also highlights the company’s solid organic growth within the social casino segment.
Moreover, profitability metrics also reflect DoubleDown’s strong performance. Adjusted EBITDA for Q1 2024 increased by 26% YOY to $31.9 million. With that, the adjusted EBITDA margin reached 36.2%, up from 32.8% in Q1 2023. This improvement points to DoubleDown’s sharp cost management strategies and operational efficiency. This has translated into significant net income growth of 28.3% to $30.4 million.
To conclude, DoubleDown’s presence on the small-cap stocks with a high potential list is supported by sharp acquisitions and bottom-line improvement.
Immersion (IMMR)
IMMR stock: two people using virtual reality (VR) headsets
Source: Shutterstock
Immersion (NASDAQ:IMMR) progresses on haptic technologies. The company’s net income for Q1 2024 was $19.8 million, $0.63 per diluted share. Compared to $9.5 million, which is $0.29 per diluted share, Q1 2023 represents a 108% increase in net income. The bottom line is progressive based on the company’s operational performance. Indeed, this solid bottom-line improvement highlights Immersion’s fundamental ability to derive constant core earnings from its business operations.
Moreover, Immersion increased its total cash by $18.7 million. The liquidity has reached $179.1 million as of March 2024, improved against $160.4 million as of December 2023. This 11.7% increase in cash and investments bolsters the company’s financial flexibility and stability. Indeed, this strong cash position enables the company to invest in growth opportunities, research, and core strategic initiatives. All this can be done without any reliance on external financing. In short, solid bottom-line improvement and liquidity led to Immersion’s listing among small-cap stocks with high potential.
Acacia Research (ACTG)
Acacia Research Corporation website homepage
Source: Pavel Kapysh / Shutterstock.com
Acacia Research (NASDAQ:ACTG) leads in intellectual property (IP) monetization. One of the standout strengths is its IP monetization business, which saw significant growth in Q1 2024. Generating $13.6 million in revenue from licensing agreements and other sources, compared to $4.2 million in the same period last year, illustrates Acacia’s strong execution capabilities in expanding its IP portfolio.
Another critical strength lies in Acacia’s successful turnaround of Printronix, an industrial operations business acquired in October 2021. Initially requiring restructuring efforts, Printronix has transitioned from consuming $3.8 million in cash during the previous twelve months to generating $6.8 million by March 31, 2024. This improvement underscores Acacia’s adeptness in implementing operational efficiencies and strategic restructuring.
Following the acquisition of Benchmark, Acacia anticipates generating approximately $50 million in asset-level cash flow over the next year. This move diversifies Acacia’s revenue streams and enhances its financial stability, focusing on capitalizing on the oil and gas sector’s revenue potential. Thus, Acacia is on the small-cap stocks list with high potential due to revenue growth potential and sharp acquisitions like Benchmark.
CTO Realty Growth (CTO)
Single family homes. Real estate
Source: tokar / Shutterstock
CTO Realty Growth (NYSE:CTO) progresses in real estate with sharp leasing success and portfolio optimization strategies. In Q1 2024, the company attained leasing leads by signing over 100K square feet of new leases, renewals, and extensions at an average rent of $27.12 per square foot. This reflects CTO Realty’s strong pricing power and sharp tenant management strategies, supported by a 68% increase in new cash base rents compared to expiring leases.
Additionally, the acquisition of Marketplace at Seminole Towne Center in Orlando, Florida, for $68.7 million further enhances CTO Realty’s portfolio. It adds a well-leased retail power center to its assets. Concurrently, a mixed-use property in Santa Fe, New Mexico, was sold for $20 million. The transaction derived a gain of $4.6 million. This demonstrates CTO Realty’s adeptness in capital recycling and optimizing portfolio value.
To sum up, CTO Realty’s high mark among the small-cap stocks with high potential is derived from its sharp leasing success and tenant management strategies.
Karat Packaging (KRT)
photo of packages and boxes on a conveyor belt
Source: shutterstock.com/cybrain
Karat Packaging (NASDAQ:KRT) provides eco-friendly packaging solutions. Despite flat annual net sales, the company had a 3.5% increase in sales volume in Q1 2024. This growth highlights Karat’s effective execution of its market expansion strategies and customer acquisition efforts, particularly in regions like the East Coast, Northeast, and Midwest. Additionally, the company’s strategic emphasis on eco-friendly products has proven successful, with a 6% rise in sales within this category. As eco-conscious consumer preferences drive market demand, Karat’s proactive approach positions it well to capitalize on this growing segment, accounting for 34.5% of total sales.
Further, Karat achieved a near-record high gross margin of 39.3% in Q1, reflecting effective cost management and pricing strategies. This margin is slightly lower than the prior year’s 39.8%. However, it demonstrates the company’s ability to navigate cost pressures such as higher freight and container rates through improved visibility into ocean freight and new contract rates. To conclude, Karat’s growth in sales volume and gross solid margins despite industry challenges make it a strong pick among small-cap stocks with high potential.
On the date of publication, Yiannis Zourmpanos did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Yiannis Zourmpanos is the founder of Yiazou Capital Research, a stock-market research platform designed to elevate the due diligence process through in-depth business analysis.
