Small-Cap Standouts: 3 Stocks Destined to Rule Their Industries


  • Various small-cap stocks are ready to prosper due to their dominance within niche industries. Consider these three stars!
  • Aris Water Solutions (ARIS): A company with a dominant early-stage market position in a developing industry.
  • Money Lion (ML): Significant fundamental growth paired with optimism from Wall Street.
  • BrainsWay (BWAY): High barriers to entry and solid realized results place BrainsWay in the upper echelon.
Small-Cap Stocks - Small-Cap Standouts: 3 Stocks Destined to Rule Their Industries

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Small-cap stock investing is an interesting phenomenon, especially from a risk-return perspective. Many are under the illusion that small-cap stocks are risky by default. Although that might be true in some instances, numerous small-cap stocks are secured by highly profitable companies that dominate niche industries. Moreover, small-cap stocks present diversification benefits, adding risk-adjusted return advantages to traditional investment portfolios.

While considering the above, I screened for three best-in-industry small-cap stocks. Methodologically, I emphasized industry positioning, fundamental aspects and valuation metrics. Moreover, I phased in technical analysis to assess the investors’ sentiment.

Having said the above, I concede that my take on small-cap stocks is merely one of many. As such, I recommend that readers consider opposing opinions before adding small-cap stocks to their portfolios. However, if your final consensus aligns with mine, here are three industry-beating small-cap stocks to consider.

Aris Water Solutions (ARIS)

A zoomed in photo of a drop of water hitting a container of water's surface.
Source: Sambulov Yevgeniy/

Aris Water Solutions (NYSE:ARIS) is a commercial water recycling business that recently earned an upgrade from Citigroup (NYSE:C), which believes the stock will reach $18 per share, a substantial increase from its $14.7 handle.

Citigroup’s outlook on ARIS stock doesn’t guarantee upside. However, it is clear why the company is optimistic about Aris Water Solutions’ prospects. For example, Aris Water Solutions has a high addressable market, namely the energy water recycling business. This fact is echoed by the company’s three-year annualized growth rate of 33.13% and impressive operating profit margin of 27.92%.

Furthermore, ARIS stock has short-term tailwinds. Most noteworthy is its recent first-quarter financial results, which surpassed its revenue estimate by $6.97 million. Moreover, Aris Water Solutions achieved a quarterly earnings-per-share beat of 10 cents, allowing it to hike its quarterly dividend by 16.7%.

ARIS stock has a price-to-earnings ratio of 20.11x and a forward dividend yield of 2.86%, which I think is unbelievable, given the company’s robust growth rate. These metrics play into Aris’ fundamental zeal. As such, I believe ARIS stock is a buy!

MoneyLion (ML)

MoneyLion Iphone Display
Source: Sulastri Sulastri /

MoneyLion (NYSE:ML) is a fintech company with comprehensive and cohesive consumer finance solutions. The firm offers various in-house and third-party services, namely banking, loan accessibility and personal finance solutions. Moreover, MoneyLion has more than 1,100 partnerships across its verticals, allowing it to scale by continuously adding new product offerings.

Although an early-stage firm, key data suggests that MoneyLion has consolidated a sustainable customer base. For example, during this year’s first quarter, MoneyLion received approximately 80 million customer inquiries and converted 1.6 million into customers.

MoneyLion’s recent engagement phased into its existing customer base, which grew by 98% year-over-year to 15.5 million after its first quarter. As a result, MoneyLion achieved a quarterly revenue beat of $4.69 million and an earnings-per-share beat of 68 cents, illustrating its industry-beating attributes.

In April, U.S. investment bank Needham upgraded MoneyLion to a Buy rating, stating that ML could be a long-term winner. I concur with Needham’s outlook, as the abovementioned data paired with ML stock’s rice-to-sales ratio of 2.02x signals a buying opportunity.

BrainsWay (BWAY)

A row of file folders with labels reading "mental health," "psychiatry," "disorders", "bipolar," "depression," "anxiety" and "schizophrenia".
Source: Olivier Le Moal /

BrainsWay (NASDAQ:BWAY) is a niche business focused on mental health disorders. More specifically, the company uses various medical devices to treat obsessive-compulsive disorder, smoke addiction, and depression.

Although BrainsWay remains in an exploratory phase, it has delivered early-stage revenue. In fact, BrainsWay has a 10-year compound annual growth rate of 35.09%, illustrating its potential. Moreover, the company’s secular growth was affirmed in its latest fiscal quarter after it surpassed its revenue estimates by beating its revenue and earnings-per-share targets by $370,000 and 2 cents, respectively.

I included BWAY stock on the list because of its addressable market, which has strong growth multiples and high barriers to entry. Additionally, as mentioned before, BrainsWay has illustrated high growth, which could merge with its favorable price-to-sales ratio of 1.24x to produce asymmetrical returns.

On the date of publication, Steve Booyens 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 Publishing Guidelines.

Steve Booyens co-founded Pearl Gray Equity and Research in 2020 and has been responsible for cross-asset research and PR ever since. Before founding the firm, Steve spent time working in various finance roles in London and South Africa. He holds an MSc in Investment Banking from Queen Mary – University of London. Furthermore, Steve obtained his CFA Charter on April 26, 2024, and is working toward his Ph.D. in Finance. His articles are published on various reputable web pages such as Seeking Alpha, TipRanks, Yahoo Finance, and Benzinga. Steve’s articles on InvestorPlace don’t constitute financial advice. However, they form an interesting juxtaposition between mainstream opinion and objective theory, allowing readers to benefit from unbiased commentary. Readers can expect coverage on frequently traded stocks, REITs, fixed-income funds, CEFs, and ETFs.

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