3 Small-Cap Stocks That Are Worth the Gamble
While your friendly financial advisor probably won’t direct you to this space, small-cap stock picks can be worth your while, so long as you understand the volatility risks and don’t unreasonably stretch yourself. To set definitions, small-cap investments refer to companies which feature a market capitalization between $250 million to $2 billion.
Fundamentally, intrepid investors appreciate gambling on risky small-cap stocks because of their upside potential. Because these issuing enterprises don’t get much press – especially compared to Wall Street titans – they lack trading volume. However, if some significant news breaks, the lack of volume can immediately translate into a tsunami. If you owned shares prior to the wave, you can win out handsomely. On the other hand, gambling on stocks – especially in the small-cap space – is exactly that, gambling. While these shares may blossom on positive news, such breakthroughs may never materialize. Worse yet, these companies can stumble badly on bad news. Still, if you like living dangerously but in a calculated way, these are worthwhile small-cap stocks to consider.
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Small-Cap Stock Picks: Cadre (CDRE)
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Based in Jacksonville, Florida, Cadre (NYSE:CDRE) bills itself as a leading global provider of safety and survivability products designed for first responders, federal agencies and personal protection markets. Per its website, Cadre also offers relevancies for the outdoor recreation industry. Since the start of the year, CDRE gained a little more than 10% of equity value.
While it might not have the outright performance stats of the best small-cap stock picks, what I appreciate here is the underlying fundamental relevance. Following the initial disruption of the Covid-19 crisis, civil society had to deal with an increase in poor behaviors. As well, public discontent and criticism toward police agencies have many folks rethinking a career in law enforcement. In other words, it’s vital to protect our men and women that serve in this increasingly dangerous field. Therefore, CDRE makes for a compelling idea if you’re intent on gambling on stocks. Financially, Cadre will require significant patience. However, it benefits from decent operational efficiency (based on its Piotroski F-Score of 7 out of 9). Therefore, it’s one of the risky small-cap stocks to put on your radar.
Kiniksa Pharmaceuticals (KNSA)
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A global biopharmaceutical company, Kiniksa Pharmaceuticals (NASDAQ:KNSA) focuses on finding and delivering novel treatments for patients with significant unmeet needs. Unlike many other small-cap stock picks in the biotech space, Kiniksa features a robust pipeline of immune-modulating, clinical-stage product candidates targeting underserved conditions. Since the beginning of this year, KNSA lost a bit more than 3% of equity value. However, in the trailing one-year period, it popped up over 26%.
Fundamentally, Kiniksa benefits largely from its drugs targeting cardiovascular diseases. According to Precedence Research, the global cardiovascular drugs market size reached a valuation of $155.6 billion in 2021. Further, experts project that the segment will expand at a compound annual growth rate of 4.52% between 2022 and 2030. At the culmination of the forecast period, the segment may hit $231.7 billion.
On a financial note, Kiniksa features a robust balance sheet. In particular, it enjoys a cash-to-debt ratio of 33.39 times, outpacing 66.73% of its peers. Also, it features solid operational efficiency based on its Piotroski F-Score of 7. Overall, it’s a great idea for small-cap investments thanks to its large addressable market and humanitarian angle.
Evolution Petroleum (EPM)
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Headquartered in Houston, Texas, Evolution Petroleum (NYSEAMERICAN:EPM) is an independent energy company. Per its website, Evolution focuses on maximizing total returns to its shareholders through the ownership of and investment in onshore oil and natural gas properties in the U.S. Since the beginning of this year, EPM gained nearly 15% of equity value. In the trailing year, EPM moved up almost 59%.
Fundamentally, the return of pre-pandemic socialization dynamics should help Evolution and the underlying hydrocarbon industry. For example, while vehicle miles traveled gained substantially since the Covid-19 lows, it’s still conspicuously below norms printed prior to the global health crisis. However, the stat should rise higher than prior norms based on broader economic growth and activity. Thus, EPM could be one of the small-cap stock picks to consider.
Financially, Evolution command strong operational stats. Its three-year revenue growth rate on a per-share basis stands at 35.9%, above 87.63% of its rivals. Also, its trailing-year net margin clocks in at 32.77%, ranked above 83.3%. For worthwhile small-cap stocks with significant upside potential, take a long look at EPM.
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 InvestorPlace.com 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.
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