Small-cap stocks, typically defined as having a market capitalization of less than $2 billion, have been underperforming the broader market this year. The Russell 2000 Index, which tracks the performance of small-cap companies, is down 0.9% year-to-date, compared to the 12.2% gain of the S&P 500 Index.

However, this does not mean that all small-cap stocks are doomed. There are still many small-cap stocks that have strong growth potential and innovative products or services. These stocks could deliver impressive returns for investors willing to take on more risk and volatility.

In this article, we will introduce seven small-cap stocks primed for explosive growth in the coming months and years. These stocks span different sectors and industries, but they all have one thing in common: they are disrupting their respective markets and creating value for their shareholders.

JAKKS Pacific (JAKK)

JAKKS Pacific (NASDAQ:JAKK) is a leading toy manufacturer and distributor of popular brands such as Disney Princess, Star Wars, Nintendo, and Power Rangers. The company emerged from the COVID-19 pandemic on much better footing as pent-up consumer demand drove more robust annual revenue growth.

More concretely, in 2021, top-line figures climbed 20.4%, while in 2022, revenue grew a record 28.2% to $796.2 million. While revenues have begun to decline in 2023 as inflation has hit several people’s wallets and pocketbooks, JAKKS could eventually see its past momentum revitalized as inflation comes under control.

JAKKS has a market cap of $179 million and trades at 5.6x forward-looking EBITDA, which makes the toy company’s valuation relative. Likewise, shares have only risen 1.6% since the beginning of the year. JAKKS’s shares were down 20.4% in mid-March, so the company’s share price has come a long way this year despite the macro volatility.

Titan Machinery (TITN)

Titan Machinery (NASDAQ:TITN) is a dealer of agricultural and construction equipment, such as tractors, combines, excavators, and loaders. Agriculture and agriculture equipment might seem like an unlikely investment for equities investors hungry to make riskier allocations.

Still, the sector has proven its ability to grow despite the current economic outlook. Despite fuel prices being high last year, Titan’s revenue grew by 29.1% Y/Y, and the company did not compromise on margins for growth. In particular, gross margins and EBITDA margins both expanded slightly on a year-over-year basis.

The equipment dealer has a market cap of $563.7 million and trades at 5.3x forward earnings. The stock had a bout of volatility after a big sales miss at the beginning of the year, but Titan has primarily made up for it with strong first and second-quarter growth in 2023. While the stock is currently down for the year, investors might see this as an excellent investment opportunity.

Express (EXPR)

Express (NYSE:EXPR) is a specialty retailer of apparel and accessories for men and women, with over 500 stores in the US and Latin America. The apparel company has undergone a successful turnaround strategy, focusing on e-commerce, loyalty programs, and product innovation.

As a result, Express increased revenue by 54.8% year-over-year in 2021. Unfortunately, revenue growth in 2022 and 2023 declined, most likely due to higher inflation and a souring macroeconomic outlook that deterred certain consumer spending habits.

However, as the economic environment improves, investors could be that Express will be able to capitalize on those growth trends. Now that the stock is trading down 58.9% for the year, it could make a good entry point for investors with enough risk appetite.

Haverty Furniture Companies (HVT)

Haverty Furniture Companies (NYSE:HVT) is a retailer of residential furniture and accessories. The retailer is perhaps well-known for its mattress products, which include Tempur-Pedic, Serta, Sealy, and Stearns & Foster. Like many consumer-discretionary companies, Haverty’s stock has not performed remarkably well this year. Shares are actually down almost 7.0% since the start of 2023.

Nonetheless, there still could be an opportunity to be had by investing in Haverty’s shares. The company’s revenues catapulted to 35.4% Y/Y growth in 2021 and maintained positive growth in 2022. If the U.S. economy can avert a hard-landing scenario, Haverty could return to positive annual revenue growth. This makes it one of those small-cap stocks to consider.

The retailer’s shares are trading around 7.5x forward earnings. Haverty’s cash balance remains high at $$109 million, and the company has zero debt, which could enable it to continue paying a quarterly dividend of $0.30 per share.

Caleres (CAL)

Caleres (NYSE:CAL) is a footwear company that owns and operates various brands, such as Famous Footwear, Naturalizer, Dr. Scholl’s, Sam Edelman, and Allen Edmonds. Before the COVID-19 pandemic, the footwear company was growing revenue steadily from year to year.

After the height of the pandemic was over, Caleres recovered from the pandemic-induced slump in footwear sales thanks to its diversified portfolio and digital capabilities.  Caleres’s revenue growth skyrocketed to 31.2% Y/Y in 2021.

For investors desiring to bet on Caleres for the long run, now may be a good time to invest. Caleres is only trading at 6.0x forward earnings, and shares have risen 19.0% YTD. The strength of Caleres’s brands could see shares appreciate even more in value in the future.

Canoo (GOEV)

Canoo (NASDAQ:GOEV) is a U.S.-based electric vehicle (EV) startup focusing on subscription-based mobility services. The company’s flagship product is the Canoo Lifestyle Vehicle, a spacious and futuristic-looking van that can seat up to seven people. Canoo also plans to launch a pickup truck and a delivery vehicle in 2023, targeting the commercial and fleet markets.

The secret to the appeal of Canoo’s vehicles is their innovative chassis design. In particular, the EV startup’s vehicles are built on a proprietary skateboard platform, which integrates the battery, motor, and other components into a modular chassis that can accommodate various body types and sizes.

Canoo has not generated any revenue yet, but it expects to be able to deliver 20,000 vehicles annually once production and manufacturing scale. As electric cars become the norm in the United States, Canoo could eventually be a company that sticks out from the rest of the EV players positively.

Ballard Power Systems (BLDP)

Ballard Power Systems (NASDAQ:BLDP) focuses on hydrogen fuel cell solutions for heavy-duty vehicles, such as buses, trucks, trains, and ships. The company primarily develops proton exchange membrane (PEM) fuel cell products and has been for more than 30 years.

Given many industries want to decrease their overall carbon emissions, Ballard has been able to expand its presence across various end-markets, including transportation (buses, commercial trucks, trains, and marine vessels), stationary power, and portable power.

Ballard Power Systems has unfortunately been impacted by slumping demand in both Europe and China for hydrogen fuel cell products due to slowing economic growth in both regions. For example, in 2022 and the first half of 2023, the company has seen sales consecutively decline. Still, these headwinds are likely to be short-term rather than a structural norm. As the global economy recovers, demand for hydrogen could pick up. While Ballard’s shares are down more than 25% YTD, investors could immensely profit from this reasonable entry point.

On the date of publication, Tyrik Torres 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.