When you consider small-cap stocks to buy, the prices are much more volatile than those of the larger, established companies.
If you look at some of the best stocks today, they started as small-cap stocks about two decades back. Some biggies like Amazon (NASDAQ:AMZN) were at $7 in 1998 and are at a whopping $102 today, after a stock split.
What is a small cap today can become one of the largest companies in the long term. Of course, not every company can become a giant but it’s rewarding to invest in small caps if you have the patience to hold it for the long term.
However, there is a greater likelihood of the small-cap stocks outperforming the large-caps and hitting new all-time highs. Over the last few months, we have seen a sharp dip in small-cap stocks because of inflation concerns and interest rate hikes.
Small-caps often get hit harder but smart investors know how to identify stocks that can become the next big thing in the near future. The market condition will improve and well will see stocks picking pace, this is when the small-cap stocks could generate solid returns.
Let’s take a look at the three small-cap stocks that can become the next big thing.
Fastly Inc. (FSLY)
At the top of my list is Fastly (NYSE:FSLY), a cloud computing service that provides and helps developers with their cloud infrastructure. The company is more than just a small-cap stock and the recent tech boom can work in its favor.
FSLY stock is trading for $16 today and is up 112% in the past six months, it once hit $120 in 2020 when all tech companies were soaring. However, the macroeconomic factors have weighed on the sector and the stock hasn’t been able to move much in the upward direction.
The stock is down more than 90% since the 2020 highs which means there is immense growth potential in the near future.
While the company is already a leader in the content delivery network, it has increased revenue at a rapid pace; it hasn’t been cut operations costs and this has hurt profits.
Product adoption is on the rise but operating costs are rising at the same pace. One solid reason to bet on the company is its product, which is in high demand today. It also partners with some of the top digital innovators.
With more than $400 million in annual revenue, the company continues to grow at a rapid pace. It has a market cap of $2 billion and if it can manage to handle the operating costs well, Fastly can soon start generating profits and the stock could pick pace.
BofA recently raised the price target of the firm to $26.50 with a Buy rating and it expects the EPS for 2023 and 2024 to come between 3c and 12c above consensus, respectively, which makes it one of the top small-cap stocks to buy.
Vertex Energy (VTNR)
Vertex Energy (NASDAQ:VTNR) is an energy company that is known for its refining business.
It is not a pure-play energy company but is an environmental services company as it recycles industrial waste streams and commercial chemical products.
In the fourth quarter results, the net income stood at $44.4 million and the net income for 2022 stood at $1.9 million. Cash and cash equivalents ended at $146.2 million.
The company announced the acquisition of Shell’s (NYSE:SHEL) refinery in Alabama and is converting it to produce renewable diesel. It has already reported a triple-digit revenue growth rate in the past three years and it shared an update about capital expenditures in the first quarter.
The company now expects the capital expenditure to range between $65 million to $70 million as compared to the previous projection of $30 million to $35 million.
It is due to the management’s decision to bring forward the $35 million of planned capital expenditures for the Alabama refinery from the second quarter to the first quarter.
The acceleration of the project will allow the company to optimize efficiencies around the schedule of the project and prepare the site’s position before the phase II launch. This is one of the top small-cap stocks to buy right now.
It has deployed investments in renewable solutions and has a market cap of around $623 million.
VTNR stock is trading at $8.24 today and has gained 38% year to date. This is one small-cap stock that will shine with time but you will need to stay patient with it. I believe the stock has the potential to double but it will test your patience.
Radiant Logistics (RLGT)
Next on the list is Radiant Logistics (NYSEAMERICAN:RLGT) which is a non-asset-based global supply chain management company.
It has a market cap of around $300 million and RLGT stock is trading at $6 today, up 20% year to date. This is one of the top small-cap stocks to buy below $10.
The company has a three-year revenue growth rate of 18.2% which is higher than many of its rivals and it shines on the high fiscal stability.
Radiant Logistics has a solid presence in North America which works in its favor but it also features many international locations. RGLT stock has got off to a wonderful start since the beginning of the year and could hit an all-time high of $8 in 2023.
The company reported first-quarter revenue of $331 million, up 10% as compared to $299.4 million last year.
Jason Seidl, D Cowen analyst has an Outperform rating for the stock with a price target of $10. As per the analyst, the company has a deleveraged balance sheet which puts it in an “enviable position” since it is on the other side of the audit process. Further, Mark Argento, a Lake Street analyst has a buy rating with a price target of $11 on the stock. The analyst believes that the company is now up-to-date with the filings since it has revamped the business model as per the reported results.
On the date of publication, Vandita Jadeja did not have (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.