Navigating today’s market where mega- and large-cap tech darlings are giving up recent gains can feel like walking a tightrope. But experienced investors know that there’s always a bull market in some asset class, such as small-cap stock picks. Typically valued between $250 million and $2 billion in market cap, these smaller companies can offer surprising opportunities for significant returns and growth potential.

With the market eyeing possible rate cuts from the Federal Reserve, small-cap stock picks look even more attractive. Lower interest rates can benefit these companies, especially since they often have more debt than their larger counterparts. Take the Russell 2000 index, a gauge for small-cap shares. It’s almost flat this year, while the S&P 500 index is up around 9%. This underperformance suggests that small-cap stocks might have more room to grow, making them an interesting choice for long-term gains.

So, consider three top small-cap stock picks for impressive returns.

Aviat Networks (AVNW)

Aviat Networks (NASDAQ:AVNW), known for its wireless solutions, is the first name among our small-cap stock picks. With over 70 years of experience, the company has built networks globally for industries like mobile operators and public safety. Its advanced digital microwave systems help reduce costs and improve network performance.

In the third quarter of fiscal year 2024, Aviat reported a 33.7% year-over-year (YOY) revenue increase, reaching $111.6 million. However, adjusted EPS of 73 cents was slightly below last year’s 75 cents. In addition, the company has lowered its growth outlook due to a slower revenue ramp-up from the November 2023 Pasolink acquisition and cautious spending by its tier-1 customers.

Nonetheless, Aviat remains an attractive option due to its growth potential, especially with the global network management market projected to grow over 10% annually through 2030. The recent acquisition of 4RF also strengthens the company’s industrial wireless solutions.

Year-to-date (YTD), AVNW stock has declined more than 17%. It currently trades at 7.9 times forward earnings and 0.90 times sales. However, analysts forecast a 12-month median price target of $51.00, suggesting a potential 89.94% upside. For those looking for value and growth in small-cap stocks, Aviat Networks could be a compelling choice.

Expensify (EXFY)

Next up among today’s small-cap stock picks is Expensify (NASDAQ:EXFY), which provides expense management software. The company’s tools simplify expense tracking and reporting, positioning it well to meet growing demand amid remote work trends.

Yet, Expensify’s first quarter 2024 results showed mixed performance. Revenue dropped 16% YOY to $33.5 million. However, net loss improved to $3.8 million from $5.9 million the previous year. Despite an 8% YOY decline in paid members to 688,000, Expensify’s cost-cutting measures proved effective. The company generated $3.5 million in operating cash flow and $5.2 million in free cash flow, reflecting its adaptability and profitability.

Looking ahead, the upcoming launch of Expensify Travel, in partnership with Spotnana, which operates a travel-as-a-service platform, will diversify its offerings. Additionally, the upcoming launch of the New Expensify platform aims to simplify expense tracking for self-employed professionals, potentially boosting user engagement and revenue.

Despite the recent rally triggered by Jim Cramer’s accidental mention, EXFY stock has fallen over 38% YTD. The shares are changing hands at 8.5 times forward earnings and 0.9 times sales. Currently, Wall Street remains bullish on Expensify stock, with a 12-month median price target of $2.50, implying a 64.47% potential upside from current price levels.

Mistras Group (MG)

Let’s explore Mistras Group (NYSE:MG) as we conclude today’s list of small-cap stock picks. The firm provides inspection, testing and asset protection solutions to ensure the safety and efficiency of operations across various industries. Its offerings include non-destructive testing (NDT) and predictive maintenance, essential for sectors such as oil and gas, power generation and aerospace.

In the second quarter of 2024, Mistras Group reported revenues of $189.8 million, reflecting a solid 7.8% growth compared to last year. The company also achieved a notable rise in EPS to 20 cents, a significant improvement from last year’s 1 cent. Additionally, the gross profit margin expanded to 29.6%, highlighting enhanced cost management and operational efficiency.

However, it is worth noting that investing in Mistras Group comes with inherent risks. Despite recent positive trends, the company faces financial challenges, such as high debt levels. In addition, a significant portion of revenues comes from the oil and gas segment, a cyclical industry. Understandably, fluctuating oil prices can significantly impact the company’s revenue streams.

MG stock has gained 35%, so far in 2024. Currently, the shares trade reasonably at 13.2 times forward earnings and 0.4 times sales multiples. Analysts have set a 12-month median price target of $14.50 for Mistras Group, indicating over 50.57% upside potential.

On the date of publication, Tezcan Gecgil 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.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.