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3 Cheap Small-Cap Stocks to Buy Before the Next Breakout


  • You have to start small to make it big. Take a look at these three small-cap stocks with solid growth potential.
  • Canadian Solar (CSIQ): Solar companies are making it big and Canadian Solar has already delivered robust quarterly numbers.
  • Solid Power (SLDP): A high-risk penny stock, Solid Power has the potential to generate 100% returns.
  • e.l.f Beauty (ELF): This stock is up over 300% in the past one year and is already at a 52-week high but it could soar higher.
Cheap Small-Cap Stocks - 3 Cheap Small-Cap Stocks to Buy Before the Next Breakout

Source: iQoncept / Shutterstock

Some of the blue-chip stocks today started their journey as small-cap stocks years back. To make the most of a stock’s upside, you need to be able to identify companies that have the potential to go far. Of course, not all companies become great giants in the industry but it can be rewarding to watch them grow starting from cheap small cap stocks.

The reason: there’s a chance it could become a multi-bagger over the years. However, there is a certain amount of risk associated with cheap small-cap stocks and if you can take the risk, you enjoy a higher chance of a near-term upside. Inflation is cooling and the market is picking up the pace. If we can manage to avoid a recession, there is a chance that the market will lift several stocks.

With that in mind, let’s take a look at three cheap small-cap stocks to buy before the next breakout.

Canadian Solar (CSIQ)

A Canadian Solar (CSIQ) display booth at a convention in Bangkok, Thailand.
Source: Shutter B Photo / Shutterstock.com

With the world moving towards a cleaner and greener future, solar stocks are a safe bet. The rising gas prices and the growing awareness of renewable energy have put Canadian Solar (NASDAQ:CSIQ) at the center stage. It has shown strong momentum lately and shares are up 30% year to date.

CSIQ stock is trading at $39 today and is up 6% in the past month. It has shown consistent momentum over the past year and I believe the stock will continue moving upwards in the near term. The solar panel maker boosted its annual solar module capacity which makes it one of the largest solar panel producers. It has supply agreements with multiple companies, which contribute maximum to the revenue.

Roth MKM has raised the stock’s price target to an average of $47.18 and has a buy rating after the company announced the pricing of its China IPO. One reason behind this is the future growth potential and the demand for solar. It can make the most of the clean energy boom and is positioned for solid long-term growth.

Solid Power (SLDP)

Smartphone with logo of American battery company Solid Power Inc. on screen in front of business website. Focus on center-left of phone display.
Source: T. Schneider / Shutterstock.com

Another green energy stock, Solid Power (NASDAQ:SLDP) is slightly risky but has the potential if it handles the operations well. The company aims to deliver a safer battery option that has high energy density and will cost less than traditional lithium-ion batteries.

While it is a penny stock, it is only suitable for high-risk investors who want to take a chance at the future of solid-state batteries. There is a 50/50 chance of the company making it big. Solid Power also has the backing of BMW (OTCMKTS:BMWYY) and Ford (NYSE:F) which shows that there is some potential in its product. It has licensed the cell design as well as the manufacturing process to BMW for research and development.

SLDP stock is trading at $2.24 today and is down 25% in the past six months. The company has a negative margin and reported a quarterly loss of $0.11 per share. It is one of the cheap small-cap stocks with a 100% upside potential if all goes well.

e.l.f. Beauty (ELF)

a collection of various cosmetic products on a black table
Source: Africa Studio/Shutterstock.com

e.l.f. Beauty (NYSE: ELF) is one of the most promising small-cap stocks to own. The company makes affordable beauty products and is making news in the highly competitive beauty industry.

It has built a solid customer base through social media-driven marketing activities and investments in research and development. Yes, the stock is trading at a high and is not cheap but it has a long run. A lot depends on how the economy moves from here. Even if there is a recession, people may switch from high-priced beauty products to more affordable products that are offered by e.l.f Beauty. It is one of the cheap small-cap stocks with solid growth potential.

In the recent company earnings, it beat estimates in revenue and earnings. The company reported quarterly earnings of 0.42 per share and hit a revenue of $187.36 million. It has beaten revenue estimates in the last four quarters. The stock was up 9% after earnings beat and half a dozen analysts raised their price target on the stock. This is one of the undervalued small-cap stocks with the potential to double in the coming months.

On the date of publication, Vandita Jadeja 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.

Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.

Article printed from InvestorPlace Media, https://investorplace.com/2023/06/3-cheap-small-cap-stocks-to-buy-before-the-next-breakout/.

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