Small-cap stocks are a good option for investors looking to gain exposure to typically newer companies offering niche products and services that may have the potential for massive share price appreciation. But, these companies are also risky because they are more susceptible to collapse from financial instability, mismanagement and an economic downturn. Investors need to understand their risk tolerance and whether buying shares in small-cap companies is worth it.
The three stocks I discuss below are all within the Russell 2000, a stock market index comprised of 2000 small-cap stocks. These Russell 2000 stocks have had large growth in 2023 so far and are poised to keep that momentum moving forward.
Sprouts Farmers Market (SFM)
Sprouts Farmers Market (NASDAQ:SFM), headquartered in Phoenix, Arizona, is a food retailer that supplies its customers with fresh, natural and organic food products such as produce, meat, baked goods, supplements, frozen foods and health products. The company has over 400 stores in 23 states, 10 of which were opened during the third quarter.
Over the last year, the company saw a 34% increase in its share price. That was due to share buybacks, new store locations and improved finances. On October 31, Sprouts released its earnings results for Q3 2023. It reported a revenue increase of 8%, and its net income remained relatively unchanged compared to 2022. Sprouts also repurchased 831,000 shares during the third quarter of this year.
SFM is a great stock with steady growth and a firm placement in the growing trend of consumers turning to healthier food options. It partnered with DoorDash (NASDAQ:DASH) back in 2022 to allow on-demand grocery delivery from Sprouts Farmers Market locations. That move greatly improved Sprouts’ positive outlook for the future.
ImmunoGen (NASDAQ:IMGN) is a biotech company located in Waltham, Massachusetts, that produces therapies like anti-body drug conjugates that target cancer cells.
ImmunoGen’s share price skyrocketed by 83% following the news that AbbVie will acquire the company (NYSE:ABBV) — one of the largest healthcare companies — in an all-stock transaction totaling just over $10 billion. AbbVie will also acquire ImmunoGen’s late-stage cancer drug Elahere, which will improve its tumor treatment portfolio.
The company’s third-quarter earnings report showed total revenue grew sevenfold compared to the year before. Due to a combination of acquisition news and positive earnings, InmmunoGen has seen its share price surge over 450% within the last year.
Duolingo (NASDAQ:DUOL), located in Pittsburgh, Pennsylvania, is an education service provider with a popular language learning platform primarily through its mobile app. It provides courses teaching roughly 40 languages. Recently, it has expanded into offering music and updated math courses through its mobile app.
Throughout 2023, Duolingo has been soaring; its share price has more than tripled year-to-date due to improved financial results and a substantial increase in its user base. On November 8, it posted earnings for the third quarter, showing total revenue increased by 43%. Duolingo’s paid subscribers and daily active users grew by over 60% compared to the year before. And Duolingo announced raised full-year guidance due to their very positive metrics.
Duolingo owns the most popular language-learning mobile app, with nearly 25 million daily active users. With the company’s expansion into other subjects, the significant growth will likely be with paid subscribers, which sits at roughly 6 million, and its net income growth. That sets up Duolingo for a great future.
As of this writing, Noah Bolton 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.