Mighty Micro-Cap Stocks: 7 Tiny Companies Packing Enormous Potential

Stocks to buy

While most investors should concentrate the bulk of their funds toward large-capitalization, high-probability enterprises, there’s some room for micro-cap stocks. These securities undergird public companies that feature a market value of less than $300 million.

One of the biggest elements that attract speculators to micro-cap stocks is their high beta or volatility. Basically, because these enterprises are so small, it doesn’t take much to move their per-share price points. That could lead to significant gains over a short period of time.

However, the opposite is also true: investors can experience devastating losses in a blink of an eye. Therefore, you must have high conviction when it comes to this space. If you’re still intrigued, consider these potentially compelling micro-cap stocks.

D-Wave Quantum (QBTS)

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Working under the computer hardware segment, D-Wave Quantum (NYSE:QBTS) develops and delivers quantum computing systems, software and services worldwide. According to its corporate profile, D-Wave offers Advantage, a fifth-generation quantum computer. As well, it provides a suite of software tools along with a cloud-based subscription that provides real-time access to a live quantum computer.

With quantum processing working at an exponentially quicker rate than classical computers can only dream of, QBTS is certainly a name to watch among micro-cap stocks. Now, financially, D-Wave hasn’t always come through. For example, in the first half of 2023, the average surprise came out to 54.8% below parity. However, it started to turn the ship around in the second half.

For fiscal 2024, experts believe revenue will reach on average $22.15 million. While that doesn’t sound like a lot, that’s nearly 153% higher than last year’s tally of $8.76 million. And fiscal 2025 revenue could hit $62.85 million.

It’s no wonder that QBTS stock enjoys a moderate buy view.

Telos (TLS)

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Falling under the infrastructure software category of the broader tech ecosystem, Telos (NASDAQ:TLS) provides cyber, cloud and enterprise security solutions worldwide. It operates in two segments called Security Solutions and Secure Networks. Over the past 52 weeks, TLS gained about 75% of equity value. However, since the beginning of January, it moved up less than 2%.

Although it has printed some wild price action, TLS stock may be worthwhile for speculators to consider. In the third and fourth quarters, Telos – while printing losses per share – still beat the expected Wall Street print by an average of 35.6%. That’s a robust margin.

Now, experts are admittedly jittery about the company’s prospects in the current fiscal year. Specifically, they anticipate revenue to land at $127.66 million, which is down 12.2% from last year’s print of $145.38 million.

Still, for fiscal 2025, they’re looking at a top line of $170.82 million. That would get the narrative righted in a hurry, which means TLS could rank among the micro-cap stocks to consider.

Mayville Engineering (MEC)

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Listed under the industrials sector, Mayville Engineering (NYSE:MEC) operates in the metal fabrication subcategory. Together with its subsidiaries, Mayville engages in the production, design, prototyping and tooling, fabrication, aluminum extrusion, coating and assembling of aftermarket components. Primarily, it serves heavy and medium-duty commercial vehicles often found in the construction industry. As well, it fulfills defense needs.

To be fair, MEC has gotten off to a slow start, achieving only parity since the start of the year. Over the past 52 weeks, it’s up more than 4%, which is a modest performance. Admittedly, Mayville’s quarterly performance in fiscal 2023 wasn’t helpful. The average earnings surprise came out to 42.6% below parity.

Still, experts believe that earnings per share will hit 77 cents for this fiscal year. That’s a big jump from last year’s result of 38 cents. Also, revenue could rise to $630.22 million, up 7.1% from 2023’s tally of $588.42 million.

Analysts rate MEC a moderate buy with a $19 price target, implying 35% upside. It’s one of the underappreciated micro-cap stocks to consider.

Outbrain (OB)

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Falling under the communication services umbrella, Outbrain (NASDAQ:OB) plies its trade in the Internet content and information subsector. Per its public profile, Outbrain operates a technology platform that connects media owners and advertisers with engaged audiences to drive business outcomes worldwide. In particular, it offers a suite of solutions for media owners that facilitates content discovery and monetization for its media partners on their sites.

To be sure, the market performance of OB stock is spotty. Over the trailing year, it’s down 3%. From five years ago, it lost stakeholders almost 80% of their holdings. However, some of the extreme downside volatility has calmed down since September 2022. It’s steadily attempting to make good financially, post EPS of 1 cent and 9 cents in Q3 and Q4 last year. Both figures beat Wall Street’s estimates.

For the current fiscal year, experts see a loss of 7 cents per share. That’s slightly better than last year’s result of a loss of 8 cents. For revenue, they believe $948.4 million is possible, representing 1.3% growth. However, 2025 could see a jump to $1.03 billion in sales.

Thus, analysts rate OB a moderate buy with a $5.53 target. It could be a surprising idea for micro-cap stocks.

PHX Minerals (PHX)

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Operating under the hydrocarbon energy space, PHX Minerals (NYSE:PHX) is involved in the exploration and production (upstream) component of the industry’s value chain. Per its public profile, PHX focuses on natural gas and oil minerals, producing and selling its critical energy commodities. Its purchasers include pipeline and marketing companies.

Politically, hydrocarbons may appear to be out of favor – and maybe that’s legitimately the case. However, geopolitical realities mean that we can’t ignore this sector even if we wanted to. Notably, PHX stock gained over 13% of equity value in the trailing month. Something’s cooking here.

To be fair, PHX’s quarterly performance last year was all over the map. For example, in Q1, its positive earnings surprise was 350%. In Q2, the company posted a breakeven quarter when the expectation called for 4 cents per share. That’s part of the reason why fiscal 2024 revenue is projected to be 16.3% below last year’s result.

However, analysts view shares a unanimous strong buy with a $4.77 price target. I believe it’s one of the micro-cap stocks to buy.

SoundThinking (SSTI)

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Conducting business as an application software specialist, SoundThinking (NASDAQ:SSTI) is a public safety technology firm. It provides what it calls transformative solutions and strategic advisory services for law enforcement and civic leadership. Most notably, the company offers ShotSpotter, an acoustic gunshot detection system. Given the raging concerns over gun violence, SoundThinking could help fill a critical need.

For full disclosure, SoundThinking isn’t without controversy. For example, one of the criticisms of the underlying ShotSpotter system is a possible lack of effectiveness and high costs. On the counterargument side, law enforcement find themselves overwhelmed with many dangerous situations. Therefore, someone needs to step in and provide a force-multiplying application.

To be sure, SoundThinking suffered some ugly quarterly results from Q1 through Q3 last year. However, in the final quarter, the company posted EPS of 28 cents, above the expected 5 cents. For the current fiscal year, experts are looking for sales of $104.84 million, up 13.1%.

Analysts rate shares a consensus strong buy with a $25.40 price target. That implies 60% upside, making SSTI a worthwhile idea for micro-cap stocks.

Xos (XOS)

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Operating under the industrials sector, Xos (NASDAQ:XOS) does business in the farm and heavy construction machinery space. Per its corporate profile, Xos designs, manufactures and sells battery-electric commercial vehicles. The company provides myriad vehicle categories, including Class 5 and 6 medium-duty rolling chassis platforms. Since the start of the year, XOS is up 7%.

Given the troubles facing electric mobility right now, XOS stock is undeniably risky. Most notably, shares slipped 49% over the past 52 weeks. That’s obviously not a great look. Further, the company only beat bottom-line targets one time in fiscal 2023. Overall, the average quarterly surprise came out to 11.63% below parity.

Still, speculators will want to keep XOS on their watch list regarding micro-cap stocks. That’s because experts believe revenue in the current fiscal year could hit $90.12 million. If so, that would represent a 102.4% year-over-year lift. In addition, fiscal 2025 sales could fly to $178.26 million.

Analysts rate shares a moderate buy with a $17.75 price target. That implies over 107% upside potential.

Penny Stocks

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Read More: Penny Stocks — How to Profit Without Getting Scammed

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. Tweet him at @EnomotoMedia.

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