The Federal Reserve’s hawkish stance has created opportunities for investors to pick up a few multibagger small-cap growth stocks. These picks are usually riskier than mid-cap and large-cap stocks. Naturally, small-cap stocks are associated with businesses that are striving for stability and expansion. However, they typically have multibagger potential and could significantly reward shareholders down the road.
Nevertheless, these stocks tend to be more volatile, which is why diversity is key in managing the risks associated with such investments. A well-rounded portfolio has a place for small-caps, mega-caps and other stocks.
With the sluggishness in markets today, it is perhaps the best time to invest in multibagger small-cap growth stocks for strong upside potential. Here are seven that are arguably the best picks and trading at multi-year lows.
Multibagger Small-Cap Growth Stocks: FutureFuel (FF)
FutureFuel (NYSE:FF) is a manufacturer of diversified chemicals and bio-based specialty chemicals in the U.S. It operates a steady biofuel and chemicals business that continues to generate healthy free cash flows and reward shareholders with sizeable dividends. FF stock currently offers an attractive 3.15% dividend yield.
FF’s chemical business continues to show green shoots, but higher feedstock prices have hurt margins for its biofuels business. Consequently, it swung to a loss from a profit last year for the second quarter. Also, it generated robust sales of $117.8 million, representing close to 59% growth from the prior-year period. Additionally, with the stock trading at just 0.91 times sales, it’s an attractive pick for long-term growth.
Celestica (NYSE:CLS) provides supply chain solutions to original equipment producers. Its lifecycle solutions portfolio has been remarkably popular over the years and continues to gain traction with every passing quarter. Moreover, it boasts a strong cash position of $365 million, with $286 million in debt.
It operates two core segments, which include cloud connectivity and advanced technology solutions. Both these segments delivered double-digit sales growth during the second quarter. Subsequently, it bumped its full-year guidance by $200 million to $6.7 billion for the year. Also, it wrapped up the quarter with a healthy 9.7% return on invested capital. As we advance, the combination of margin and top-line growth will result in robust share price gains for its stock.
Multibagger Small-Cap Growth Stocks: AMMO Inc. (POWW)
Ammunition manufacturing specialist AMMO Inc. (NASDAQ:POWW) is a rare example of a monumental success in a traditional industry. It’s grown its sales by a whopping 234.5% in the past five years, which is a head and shoulders above its competition. Yet the stock trades at highly attractive levels and could be picked up for some chump change.
The sector is benefitting immensely from high demand and supply chain troubles. The unique combination has resulted in a mind-boggling 363% increase in EBITDA in the past 12 months. On top of that, its revenue has grown above historical levels by roughly 158% on a year-over-year basis.
Hope Bancorp (HOPE)
Hope Bancorp (NASDAQ:HOPE) provides banking services to the growing Asian American community in the U.S. It’s been a consistent performer in terms of top and bottom-line growth over the years. Moreover, it also boasts a relatively impressive dividend profile with a 3.6% yield and a payout ratio of more than 30%.
Its second-quarter results were promising; revenue improved by 12.1% to $154.3 million. Moreover, it recorded net recoveries of $930,000, the third straight quarter of total recoveries.
Due to rising interest rates, its interest-bearing loan growth slowed down considerably. However, growth in non-interest-bearing deposits and variable interest loans compensated for the lack of growth. With inflation rates coming in flat month-over-month in July and unemployment rates back at pre-pandemic levels, the firm’s loan growth could start moving northwards again.
Multibagger Small-Cap Growth Stocks: Perion Network (PERI)
Perion Network (NASDAQ:PERI) is an ad-tech platform that specializes in display advertising through Connected TV and in search through Microsoft’s (NASDAQ:MSFT) Bing search engine. Its CEO’s efforts to streamline the business have unlocked plenty of value for investors.
A couple of catalysts are likely to boost PERI stock’s long-term potential. Firstly, its SORT technology has grown in popularity in the past few quarters. Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google plans to stop using cookies in an attempt to dampen concerns surrounding data privacy. Perion’s SORT technology addresses these concerns effectively and could become marketers’ go-to option. A testament to its success is a 62% customer growth during the second quarter.
Perion delivered across virtually every metric in its second-quarter results. However, a key outlier was its video revenue which grew a whopping 273% on a year-over-year basis. Video advertising could grow by a spectacular 41.1% from 2021 to 2027, which points to a massive growth runway for Perion.
Mesabi Trust (MSB)
Shares of Mesabi Trust (NYSE:MSB) took a beating on the back of a dispute with steelmaker Cleveland-Cliffs (NYSE:CLF). Mesabi earns a healthy royalty stream from one of the iron ore mines operated by the latter company. Revenues are up more than 129% on the back of strong iron ore prices, but Cleveland-Cliffs has plans to idle supply as a bargaining tactic to lower royalty payouts. Though MSB might face short-term troubles in this regard, it’s unlikely to face continued problems in the long run.
For starters, Cleveland-Cliffs has spent a ton of money on the mine and touted it as a major source of competitive advantage. Moreover, it constitutes a small portion of its overall income, and with rising iron ore prices, it seems unlikely the steelmaker would substantially limit output. Hence, Mesabi is likely to gain big over the long term and reward shareholders with an even higher yield than the 12.3% it currently offers.
Multibagger Small-Cap Growth Stocks: Bassett Furniture (BSET)
Bassett Furniture (NASDAQ:BSET) is a Virginia-based furniture manufacturer, retailer and wholesaler. It has had an excellent track record in growing sales and earnings at extraordinary pace. 2021 was its best year, where it made an astonishing $487 million in revenue, a 26% improvement from the prior-year period.
It reported $128.7 million in second-quarter sales, an $18.7 million bump from the same quarter last year. Retail and wholesale sales improved by double digits, while its order backlogs are expected to remain strong at least early fall. In managing its business risks, it has significantly improved its wholesale field organization and exposed its products to a diverse set of retailers and designers. All the while, BSET stock trades at just 0.4 times forward enterprise value to sales. Additionally, it raised its dividend by an incredible 14% to 16 cents per share.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
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.