Small-Cap Shamans: 3 Stocks Invoking the Spirits of Astonishing Returns


  • Roll the dice on these risky but compelling small-cap stocks.
  • LSI Industries (LYTS): LSI Industries offers an underappreciated but important lighting and imaging business.
  • Couchbase (BASE): Couchbase presents modular software that aligns with the focus on cloud computing.
  • Coursera (COUR): Coursera is super risky but its ability to provide degrees and certificates can’t be touched by AI.
Small-Cap Stocks - Small-Cap Shamans: 3 Stocks Invoking the Spirits of Astonishing Returns

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While financial advisors will direct you to safe and reliable large-capitalization companies, here’s the thing: if you want the magic to truly come alive, you may have to consider small-cap stocks. As the name suggests, they’re relatively tiny enterprises waiting for that moment in the spotlight. If it materializes, they could be off to the races.

Think of it this way. If you’re shooting a film on a shoestring budget, you can’t hire a Hollywood A-lister for obvious reasons. You got to find unknown talent and hope that they shine through. Chances are, they won’t – but there’s always hope that you can find a diamond in the rough. It happens every now and then.

It’s a risky way to go about your business. However, the rewards can be intense. If you’re up for the challenge (and the likely volatility), below are small-cap stocks to consider.

LSI Industries (LYTS)

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Based in Cincinnati, Ohio, LSI Industries (NASDAQ:LYTS) produces and sells non-residential lighting and retail display solutions. Its main markets are the U.S., Canada, Mexico and Latin America. Primarily, the company specializes in its lighting technologies, which are used in fixtures in commercial and industrial sectors. It also offers imaging and display elements, serving enterprises in the refueling and convenience store ecosystem, along with other high-traffic establishments.

At first glance, LSI might not seem like a particularly exciting company. However, lighting and display solutions represent everyday necessities and creature comforts that we take for granted. If those components suddenly disappeared, we’d notice. Therefore, it’s one of the potential hidden gems on Wall Street.

To be fair, covering experts aren’t anticipating a robust performance in fiscal 2024. Earnings per share may decline 6% to 93 cents while revenue may also slip about 6% to reach $467.64 million. However, a comeback could be in order for fiscal 2025, when analysts anticipate EPS of $1.06 on sales of $556.93 million. Therefore, LYTS may be one of the small-cap stocks to put on your radar.

Couchbase (BASE)

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Headquartered in Santa Clara, California, Couchbase (NASDAQ:BASE) falls under the infrastructure software realm. Per its public profile, the company provides a cloud database platform for enterprise applications. It primarily serves the U.S. market though it also features an international presence. Through its unique cloud environments, it’s able to foster a modular platform for high-performance applications.

With so much data being driven and extrapolated in cloud networks, Couchbase could potentially see explosive demand. During the trailing 12 months (TTM), the company posted a net loss of $80.18 million or $1.70 per share. That’s not particularly encouraging. However, revenue landed at $180.04 million, with the current quarterly sales rate (year-over-year) landing at 20.3%.

For the current fiscal year, experts see loss per share reaching 43 cents, an improvement from last year’s 57 cents. On the top line, revenue could hit $206 million, up 14.4% from the prior year’s tally of $180.04 million. Also, in the following year, sales could fly to $241.92 million, implying 17.4% growth. Thus, BASE could be one of the small-cap stocks to buy.

Coursera (COUR)

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It’s time to be blunt: Coursera (NYSE:COUR) is downright risky and I hesitate to include it on this list. If you pull up COUR’s year-to-date chart, it almost looks like a perfectly linear trip down to market perdition. When analysts talk about avoiding attempts to catch a falling knife, they had ideas like COUR in mind. So, why bring it up?

With the advent of artificial intelligence, companies focused on online tutoring have come under serious pressure. For instance, look at the YTD chart for Chegg (NYSE:CHGG). It follows basically the same trajectory as COUR stock. However, in the case of Coursera, I believe the AI angle is overplayed. This isn’t just about looking for information. Rather, the company offers online certificates and degrees – something that AI can’t touch.

I’m not sure the financials also justify the ugliness. In the TTM period, the company posted revenue of $657.19 million. Its current quarterly sales growth rate stands at 14.5%. For fiscal 2024, it sees revenue hit $699.76 million, up 10.1%. And the top line could expand another 13.1% in fiscal 2025.

If you can handle the wildness, COUR is one of the small-cap stocks to consider.

On the date of publication, Josh Enomoto 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 Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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