Small-cap stocks to buy offer a window into the future of the global economy, encapsulating companies with market capitalizations upwards of $250 million and $2.5 billion.

These are the potential giants of tomorrow, starting as small-caps and gradually ascending to large or even mega-cap status through consistent earnings expansion. This journey not only escalates their market value but also provides a profitable ride for investors.

Despite the challenging milieu shaped by high interest rates and inflation, the best small-cap stocks to buy have shown resilience this year. With these economic pressures expected to ease in the coming year, a resurgence in the Russell 2000 index is on the horizon.

This scenario presents an opportune moment to explore some of the most promising small-cap stocks. Analysts have spotlighted a few names poised for significant gains in the upcoming year. Here’s a sneak peek into three top-rated small-cap stocks to buy to brighten your investment portfolio potentially.

Arcos Dorados (ARCO)

Arcos Dorados (NYSE: ARCO), the master franchisee of McDonald’s in Latin America and the Caribbean, has been a standout this year among the top small-cap stocks to buy.

The company’s stock has witnessed an impressive 36.34% growth in value year-to-date, signaling investor recognition of its previously undervalued status. Yet, even with this significant growth, ARCO still harbors the potential for further re-rating.

Arcos Dorados, the master franchisee of McDonald’s in Latin America and the Caribbean, has been a standout this year among the top small-cap stocks. The company’s stock has witnessed an impressive 36.34% growth in value year-to-date, signaling investor recognition of its previously undervalued status. Yet, even with this significant growth, ARCO still harbors the potential for further re-rating.

The third quarter performance bolsters this optimistic outlook. ARCO’s third quarter Non-GAAP EPS of 30 cents exceeded expectations by 10 cents, with revenues climbing to $1.13 billion, a 22.1% increase year-over-year, beating estimates by $10 million.

Its consolidated adjusted EBITDA rose notably by 25.8% and 43.9% in constant currency. Adding to this positive scenario, Tiprank’s analysts project a 25% upside potential for ARCO, currently holding a Moderate Buy rating.

This robust financial health and favorable analyst outlook paint a bright picture for ARCO’s future growth.

Build-A-Bear Workshop (BBW)

The holiday season brings a spotlight to Build-A-Bear Workshop (NYSE:BBW), a name synonymous with more than just toys; it’s an immersive experience.

This specialty retailer stands out in the bustling holiday market, offering a personalized journey where shoppers select and stuff their toys, enhancing them with a myriad of clothing and accessories.

This bespoke approach has resonated remarkably well with customers, setting Build-A-Bear apart from typical toy stores.

Build-A-Bear isn’t just limiting its magic to over 500 physical stores; it’s also expanding its digital footprint. The company’s e-commerce site is evolving, featuring an innovative online bear builder and an animated workshop, making the bear-building experience accessible from anywhere.

Its expansion into diverse markets and digital platforms positions Build-A-Bear for robust long-term growth, appealing to a wide range of customers this holiday season and beyond.

It boasts an 11% and 12% net income and levered free cash margin, respectively. Also, it offers a stellar return on equity at 51%, more than 350% higher than the sector median.

Hudson Technologies (HDSN)

Hudson Technologies (NASDAQ: HDSN), valued at $540 million, is making a significant impact in the refrigerant services sphere, primarily within the U.S.

As a top player in this market, HDSN has shown incredible resilience, navigating through pricing challenges while maintaining powerful gross margins. Also, its adept approach to debt reduction further underscores its financial astuteness.

Hudson Technologies isn’t just about managing refrigerants; it’s about shaping the future of the industry. Its commitment to sustainable refrigerant management, combined with innovative proprietary reclamation technology, positions it at the forefront of an evolving market.

Hence, Hudson Technologies presents an interesting case for investors looking toward the future of environmental sustainability in the industry.

It boasts an impressive profitability grade, outperforming its sector in key financial metrics, and offers a gross profit margin of 38.71%, significantly higher than the sector median and its 5-year average. This indicates enhanced efficiency in generating sales.

Vir Biotechnology (VIR)       

Vir Biotechnology (NASDAQ: VIR) remains a prominent player in the biotech industry, which is arguably one of the best long-term Bill Gates stocks to wager on.

It aligns perfectly with the foundation’s mission, given that most of its holdings are healthcare stocks. As of June 30, the company constituted a massive 30.4% of the foundation’s $125.6 million assets, a position established back in 2020.

Despite a challenging 2023, where Vir’s shares dropped by double-digit margins, mainly due to a  drop in July following the failure of its experimental flu antibody therapy in mid-stage trials, the company’s prospects are not all bleak.

The firm’s sotrovimab antibody therapy, created in collaboration with GSK and marketed as Xevudy, remains a key asset. It finds itself in the scaling phase of its partnership with GSK with the potential for future quarters to see reduced expenses and increased sales from Xevudy.

This possibility, coupled with Vir’s strategic focus and significant backing, positions it as a top player in its niche.

Redwood Trust (RWT)

Redwood Trust (NYSE: RWT), classified as a Real Estate Investment Trust (REIT), showcases a diversified investment approach across its three operational segments. Its portfolio is remarkably strong in business purpose lending loans and prime jumbo residential mortgages.

A key strength of RWT’s portfolio is its composition of short-term floating-rate BPL loans, which helps mitigate the risks associated with fluctuating interest rates. Despite a rise in delinquencies, the geographical diversity of its loan distribution acts as a buffer.

Investors eyeing RWT will find its proposition appealing, especially with its substantial yield offering. The REIT recently declared a consistent 16 cents per share quarterly dividend, maintaining its previous rate.

With a forward yield of 9.34%, RWT stands out for income-focused investors. However, prudent investors should weigh post-earnings performance and delinquency trends before committing. Adding to its attractiveness, RWT stock is projected to offer a 19% upside from its current levels, earning a Moderate Buy rating.

AST SpaceMobile (ASTS)

While SpaceX leads the satellite-enabled connectivity domain, AST SpaceMobile (NASDAQ: ASTS) emerged as a compelling small-cap stock for those looking to expand their presence in the space industry.

Unlike SpaceX’s Internet focus, the company is efficiently carving a niche in expanding mobile phone coverage through satellites, especially in low-connectivity areas.  

Furthermore, AST SpaceMobile’s collaboration with AT&T underlines its potential. The company recently achieved a milestone by completing the world’s first 5G audio call between standard cell phones via a low-earth orbit satellite, a feat achieved with AT&T’s support.

This partnership with a telecom heavyweight, including AT&T, not only validates the company’s vision but also hints at a promising future ahead. As of September, it boasts $135.7 million in cash and equivalents, further solidifying its standing in the market.

This blend of innovative technology, strategic partnerships, and a strong financial base makes AST SpaceMobile a small-cap stock with potentially out-of-this-world prospects.

Ginkgo Bioworks’ (DNA)

Ginkgo Bioworks (NYSE:DNA) operates at the frontier of synthetic biology. This biotech company efficiently crafts organisms for various applications, from protein development to enzyme creation.

Its technology extends to consumer sectors, including brewing, where it improves fermentation processes. Despite its pioneering role, Ginkgo Bioworks has seen its stock drop considerably, impacted by the end of Covid testing contracts and current economic challenges.

However, the company’s broad spectrum of applications across the biotech industry, where others depend on its technology for developing therapeutics, emphasizes its relevance. While short-term hurdles remain evident, the current valuation of this small-cap stock presents an attractive buying opportunity.

The long-term potential of Ginkgo Bioworks, given its critical role in advancing biotechnology, suggests a promising horizon for investors willing to weather the immediate challenges.

On the date of publication, Muslim Farooque 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.