9 Small-Cap Stocks With Growth Potential

9 Under-the-Radar Small-Cap Stocks That Look Set to Grow in 2021

Last Updated July 23rd 2021
29 Min Read

Are you looking to add diversity to your portfolio by investing in small-cap stocks in 2021? Then take a look as we have picked 9 small-cap stocks that are sitting in an attractive spot establishing nicely under the radar. 

9 Small-Cap Stocks With Growth Potential

  • Golden Nugget Online Gaming (GNOG) 
  • B.Riley Financial (RILY)
  • Bellring Brands (BRBR)
  • Lovesac (LOVE)
  • BJ’s Restaurant (BJRI) 
  • Meredith (MDP)
  • LivePerson Inc (LPSN) 
  • Clearwater Paper (CLW) 
  • Glatfelter (GLT) 

 

In the stock market world small-cap stocks are stock gems within their own right as they aim to push boundaries and potentially become the next ‘big thing’ on the market.

These stocks attract most investors for one reason or another, especially at the start of a bull market as investors will sway towards small-cap stocks in order to archive greater returns. Historically within a bull market small-cap stocks have outperformed large-cap stocks over the years.

Although these stocks attract a lot of experienced investor attention, many beginner investors also opt to invest in such stocks to begin their trading journey. For reasons such as these stocks hold more affordable prices to enter the world of stocks, whilst they can create and make surprise returns within a short period all due to their growth potential.

A great additional example of a small-cap stock that has performed well was Vista Outdoor Inc (VSTO), as the stock returned just over 160% in 2020. Within Vista’s record Q2 2021 financial report, the stock confirmed that gross profit was up by 79% and held positive free cash flow of $190 million. These are just two positives confirming which way the stock is heading.

In March 2020 at the start of the pandemic small-cap stocks became the main focus for investors. As large-cap stocks took a downward spiral and the leading S & P 500 index between the 2nd of March to the 11th March declined by almost 13%, this then led to the start of the global stock market 2020 crash on the 12th March leaving small-cap stocks to be the main attraction.

But the short-lived bear market soon quickly turned into a bull market as stocks were once again on the rise.

Contents: 

What Is a Small-Cap Stock?

Advantages of Small-Cap Stocks

Risk Factors to Look Out for Within Small-Cap Stocks

9 Small-Cap Stocks To Buy

Overview: 9 Small-Cap Stocks with Great Growth Potential

 

What Is a Small-Cap Stock?

The definition of a small-cap stock relates to a company that is on a smaller scale in terms of its market capitalisation. The range that defines a small-cap stock within their market capitalisation typically ranges from $300 million up to $2 billion.

The definition of market capitalization relates to a company’s value in terms of outstanding shares and is calculated by taking a company’s outstanding share volume and multiplying with a company's current share price.

For example, take the leading streaming platform Netflix Inc (NFLX). The stock currently shows it has 441.8 million outstanding shares with a share price per share of $553.47 upon writing this report, then when you multiply the volume by the share price it will give a total market capitalisation of $244.5 billion.

In summary, the definition of a small-cap stock is a company that holds a market capitalization typically of below $2 billion.

Advantages of Small-Cap Stocks

As a general rule of thumb, small-cap companies do offer greater growth prospects compared to large-cap companies. Although larger companies have grown into big-time players, they do tend to have a lower ceiling in terms of growth capabilities. Whereas small-cap companies could have many years of growth potential and price appreciation ahead.

Another benefit that small-cap stocks hold over large-cap stocks is that they can be more agile than larger companies. This makes it easier and quicker for smaller companies to adjust to market trends and demands in terms of new products and services, leading a small-cap stock to outshine its bigger competitors.

Risk Factors to Look Out for Within Small-Cap Stocks

Although small-cap stocks do come with fantastic advantages for investors, they do come with stronger risk elements compared to mid or large-cap stocks.

Firstly, small-cap stocks can be extremely volatile as the market fluctuates and even more so within an economic contraction as many small-cap companies will not have the backup that large-cap stocks will be equipped with.

Secondly, these stocks do tend to offer limited liquidity. This terminology relates to how easy it is to buy and sell shares of a stock in a specific company.

For large-cap stocks, it is much easier to buy and sell shares as typically they are more well known and have more investing interest. Whereas some small-cap stocks may not be as well known and provide challenges when looking to buy shares, vice versa when it comes to selling of shares as there are a few buyers looking to invest in such stocks.

And one of the last points to take into consideration is that small-cap stocks do tend to be less transparent, than of large-cap stocks. This means that it can be difficult to determine how well a stock is performing within their financials due to a lack of information. Inevitably, this can make it challenging or in some cases impossible to see a small-caps stocks future potential.

Having explained what small-cap stocks are and the pros and cons of investing in them, now it ultimately comes down to an investor's investing needs whether to make the choice if to invest in a small-cap company.

Even if you consider adding at least 20% exposure of small-cap stocks, it can provide great diversity along with offering rewarding returns in both the short-term and long-term outlook as they look to outperform.

Now we have looked at what investing in small-cap stock entails, let’s take a look at 9 small-cap stocks that offer great growth prospects in 2021.

9 Small-Cap Stocks to Buy:

1. Golden Nugget Online Gaming (GNOG) 

The world of online gambling is making its way to vastly becoming an industry that is looking set to reach new record highs in 2021 and the coming years, with Golden Nugget Online Gambling (GNOG) being one gaming stock to keep on your radar.

The iconic Golden Nugget brand in a nutshell is a company that holds a mix of both hotels and casinos within the United States. Beside the stock having its physical presence felt, GNOG also holds its hands within the online gaming segment and has established well over the year despite the stock having faced challenging times.

In an overview, GNOG stock reported revenues of $91.1 million in 2021, an increase of 64.4% YoY with adjusted EBITDA of $28.9 million. Within the stock’s Q4 outlook the company confirmed that revenues grew by 47.9% YoY to $23.0 million, adding to total revenues of what could be a ‘$30 billion dollar industry’ stated by President Thomas Winter.

The stocks future goals is to keep innovating and pushing its online gambling service across more states across the U.S with Michigan, New Jersey and the state of New York now having access to GNOG stocks online casino and sportsbook. Whilst the stock has been granted access to operate in further states, subject to approval include West Virginia and Illinois. These confirmed market access agreements have now grown to 10 states from 7 covering 26% of the U.S population.

Off the back of the stocks success within this avenue in 2020, the company has risen its full-year 2021 revenue guidance between a range of $130 million to $145 million, showing an increase of 51% midpoint to 2020.

On the same hand, analysts who are covering this small-cap stock have given a revenue forecast of $144.3 million over 2021, an increase of 58%. When looking over a three-year outlook analysts have given a revenue forecast of $308.2 million, an increase from 2021 of a huge 238%.

For a small-cap stock, this company is sitting in a relatively well cash flow position with $77.9 million in cash at the end of 2020 leading to $110.2 million at the end of March 2021, making it possible to establish further top-line growth and adding to its current positive cash flow position.

As more U.S states legalise online gambling and the iGaming industry set potential to hit $40 billion by 2030, the growth potential within the iGaming industry is undeniable. On this note, GNOG is looking like a small-cap stock that can continue to deliver to new record highs over the coming years as it takes its place within this whirlwind industry.

Although the stock is currently trading -51% down from its 52-week high at $13.22, now could be the ideal time to add this exciting small-cap stock to your collection.

Read Also: 7 of the Best Sports Betting Stocks to Watch

2. B.Riley Financial (RILY) 

One of the fastest-growing small-cap stocks on this list is B.Riley Financial (RILY).

Headquartered in Los Angeles, California, B.Riley Financial Inc (RILY) is an organisation that offers an array of financial services including commercial lending, valuation services along with much more. The company has over 200 offices within the United States as well as having its presence felt internationally.

The company hit record annual total revenues of $902.7 million in 2020, up from $652.1 million in 2019 confirming a difference of $250.6 million over the year.

Other standout fundamentals include net income reaching $170.1 million compared to $81.3 million in 2019, providing a 146% increase over the year, diluted EPS increased to $7.56 vs $2.95 per share and annual total adjusted EBITDA of $406.8 million against $207.9 million.

In 2020 the stocks recurring business played a huge part in the company’s success over the year, but overall it was the company’s separate avenues including the stocks brokerage and retail liquidation that were the real winners.

On the note of its episodic businesses, RILY announced that it acquired National Holdings Corporation (NHLD) in 2021 to further enhance its platform with over 700 registered representatives and a database of over $18 billion in client assets. Alongside, NHLD stock hit total revenues of $229.9 million in 2020 with these assets now adding to B.Riley.

The stock has gained just over 250% over the past year with earnings growing by 150%, and the stock is continuing to reach new highs with its strategic plans in 2021 as the company recently announced its Q1 2021 guidance.

The company estimates operating adjusted EBITDA in the range of between $105 to $115 million within Q1, compared to operating adjusted EBITDA of $70.9 million in Q1 2019, an almost 50% increase YoY.

RILY currently holds a P/E ratio of 9.1 which is looking attractive and holds a share price of $68.67, down by -5.74% from its previous close, yet is still trading near its 52-week high of $73.03. This stock is certainly one small-cap stock that can take advantage of the consumer demand, especially as the housing market is booming across various countries showing that there is plenty of opportunity for growth ahead.

3. Bellring Brands (BRBR)

Bellring Brands (BRBR) is a holding company that operates globally within the nutrition world. The stock has several brands which include PowerBar, Premier Protein and more under its roof, with the brand having a mix of all major products within the nutrition category that include protein shakes, nutrition bars, powder, supplements and more.

As the world has switched to a more active and healthier lifestyle brought on heavily due to the pandemic, this healthy avenue is set to rise quicker than anticipated over the coming years with the global Vegan Protein Bar Market being forecast to grow with a CAGR of 5.6% over the next four years.

Due to sitting within this captivating and growing industry, BRBR stock is positioned well within the market due to its diverse portfolio and having adapted to individuals' everyday lifestyles with offering ‘convenient nutrition’.

And to add more good news, the stock holds great growth prospects both nationally and internationally as some of their brands are sold across various international countries.

The stock managed to hit $988.3 million in net sales in 2020, up by 15% YoY with the stocks Premier Protein brand being its most successful in 2020 increasing net sales by 21.8%.

Additionally, adjusted net earnings for the stocks shareholders came in at $23.9 million, $0.61 per diluted share of Class A common stock.

The stock is looking to brighten up the future in 2021 as BRBR has released its guidance for fiscal year 2021. The company is looking to grow net sales in high single digits in the first half of 2021 and looking to mid teens within the second half of 2021 between 8%-13% respectively, with adjusted EBITDA growth to start within the second half of 2021 between 5% - 10% respectively.

Lastly, Bellring stock expects capital expenditures of approximately $4 million in fiscal year 2021. This result will be pushed by the company’s “asset-light” business model as it looks to drive forward with lower capital expenditure yet delivers results through strong cash flow returns.

Three analysts covering the stock have issued an upgrade for BRBR stock within recent weeks giving the stock a ‘Strong Buy’ rating, with two analysts giving an average price target of $30 showing an upside of 21.41% from where the stock currently sits at $24.71.

Based on 7 analysts predictions, the stock's EPS is set to grow over the coming three years with an earnings forecast of $0.79 in 2021 leading to an earnings forecast of $1.26 per share, up by 93%.

With strong consumer demand for low-carbohydrate, high-protein and dietary specific products, BRBR stock has its hands firmly within this compelling market and can potentially witness impressive growth as it continues to manufacture and sell its products in convenient and accessible ways worldwide.

Check Out: Best Stocks to Buy Under $20

4. Lovesac CO (LOVE)

The American furniture retailer Lovesac CO (LOVE) has been a successful small-cap company over 2020 with its unique designs.

The stock looks to manufacture and sell seating furniture ranging from its ‘foam-filled furniture’ products which include beanbags, sacs and more to the brands sactional products.

The Lovesac company operates in both avenues having over 90 showrooms within the U.S, along with the company having a very strong online presence, with it being the stock's online sales that has driven the company forward over the past year for the stock to reach new record highs and is continuing to push down boundaries.

The LOVE stock has boomed over the year with its shares being up above 1,000% over the past year. And from the start of 2021 shares are up over 60% up to 21st April.

Looking to the future analysts are predicting an upside for the LOVE stock over the coming three to five years with a forecast earnings growth rate of 35.7%.

Within the stocks Fourth Quarter and Full Year results, LOVE confirmed a whopping 40.7% growth in revenue YoY to $129.68 million, beating the consensus estimate of $13.55 million. This result was mainly brought on through the stocks eCommerce sector followed by its retail sector as it slowly made a recovery due to the pandemic limiting or seizing retail operations in periods.

LOVE stock also managed to deliver non-GAAP EPS of $1.37 within Q4 and GAAP EPS of $1.37, both beating expectations. And the stock grew its cash balance to $78 million, a 62% rise YoY and currently sits in a no debt position.

The company’s ‘Designed for Life’ philosophy is the main driver behind delivering continued growth and increasing profitability over the year, along with reaching targets of little or zero waste and emissions by 2040, confirmed by CEO Shawn Nelson.

Analysts have given a forecast revenue of $39.2.2 million in 2021, an increase of 22.29%. With a forecast revenue of $550.6 million an increase of 71.67% by 2024. Overall the stock has gained a concenous ‘Buy’ rating from analysts.

There is looking to be a long road of growth ahead for LOVE stock that stretches far beyond the post-pandemic world as Lovesac looks to sustain, create and deliver new designs whilst being very accessible to purchase. With Profit margins increasing by 4.6%, this is a stock to look to add to your portfolio in 2021.

5. BJ’s Restaurant (BJRI) 

The American restaurant chain BJ’s Restaurant (BJRI) is looking to be a small-cap stock that looks to gain good momentum looking further into 2021 and beyond.

BJ’s Restaurant (BJRI) has an array of names under its belt that include BJ’s Restaurant & Brewhouse, BJ’s Grill, BJ’s Pizza & Grill and more. Whilst the stock also looks to deliver its own products including its own handcrafted beers and more.

The hospitality sector across the globe was hit tremendously hard in 2020, and is still feeling the immense impacts that Covid-19 placed on top of this industry. According to many analysts who are watching the stock have given forecast predictions based on the early improving signs from the company’s latest earnings report.

Stephens analyst James Rutherford is the latest analyst to give his verdict on BJRI stock. Rutherford has given BJRI an average price target of $70, a 20% upside from its price today at $58.33. Whilst further analysts have given a price target range of between $19 up to $80, given by Wells Fargo analyst Jon Tower showing a potential 37% upside.

CEO Greg Trojan, has encouraged both analysts and investors to consider the stock within its latest release as Trojan confirmed trends in the beginning months have been encouraging with 144 restaurants now opened with 65 now being able to serve outdoors. This announcement was followed by confirmation that weekly sales had increased to $74,000 in February compared to $66,400 in January.

Alongside, BJ’s Restaurants are pushing their growth opportunities by introducing digital ordering that includes digital menus, digital payments and more to be added to the business in order to continue to gain consumer demand and overall boost sales, adding to the stocks top line.

Within the stocks Fourth Quarter and Full Year 2020 results BJRI confirmed that restaurant operating weeks increased by 0.6% in Q4 as restrictions eased across the nation. And reported a revenue of $197 million but carried a net profit of - $17.67 million.

Naturally BJRI stock took a hit over the year with total revenue decreasing 33%, comparable restaurant sales declined by 34% and a net loss of $57.9 million compared to net income of $45.2 million.

So far in 2021, BJRI stock has gained 53% and currently sits on a price of $58.33 which signifies that the stock is undervalued based on various metrics and the strong growth potential that this small-cap stock can archive in the coming year and years ahead as the world slowly opens up.

6. Meredith (MDP)

Meredith (MDP) is an American media company that is based in Des Moines, Iowa, and publishes magazines and websites alongside owning T.V and radio stations within the U.S.

As we move forward in 2021 the stock is witnessing stronger customer engagement that it has ever witnessed before. Within the company's Q2 2021 results it was shown that revenues grew by 11% YoY to $902 million and within this record revenue result, the stocks Local Media Group Political and Spot and Digital Advertising increased by 96% from its spot two years prior.

This is just the tip of the iceberg for the company as it confirmed Q2 cash flow from operations and free cash flow more than doubled to $183 million and $174 million respectively YoY. Adjusted EBITDA grew to $304 million growing by 57% and Q2 earnings from continuing operations hit a record $149 million from its prior-year period.

Despite challenges that Covid-19 has brought to stock and the competition that surrounds the digital media market, MDP is looking to match the bill as a small-cap stock that could be a good little player. 

Having the ability to reach an audience over 190 million with 95% of this figure being women in the U.S as the company confirmed, this stock is looking to continue to meet consumer demands through their diverse portfolio whilst evolving in all areas looking to engage a wider audiance moving ahead. 

On the subject of growth opportunities, the stock has also been linked to potentially looking to offload its television stations and having its main concentrations on its magazine division and establishing growth within its digital presence. Additionally, this will work well in two key areas for the company as another one of the stocks key aims for 2021 is to push down its net debt which currently holds at $3 billion in long-term debt.

The stocks share price is currently up around 145% to where it sits today at $30.74, with Benchmark’s analyst Daniel Kurnos giving the stock a price target of $38 along with a ‘Strong Buy’ rating.

The stock has also been given a Zacks Rank ‘Hold’ rating alongside an A grade for growth and an A for Value, adding to the company’s potential future outlook.

MDP is a small-cap stock that investors should consider as it plans to take advantage of the growing consuming demand within its magazine segment as it seeks to further evolve over the coming years.

7. LivePerson Inc (LPSN) 

LivePerson Inc (LPSN) is a small-cap stock that has been getting a lot of attention over the past year.

The global technology company is best known for its Conversational cloud platform that serves over a billion brands to communicate directly with their consumers via the company’s LiveEngage online chat platform.

The company's LiveEngage software platform can initiate conversations from brands to consumers via Whatsapp, Websites, Facebook Messenger and Smartphone apps providing to keep the demand strong for businesses with being accessible to communicate.

The stock managed to gain record results in 2020 as the company reached record revenue of $367 million, a rise of 26% YoY, Q4 revenue made it the first quarter to archive its first $100 million in revenue showing a 29% rise and lastly, the stock signed 525 deals within 2020  signing 197 new customer contracts and 328 existing contracts.

The stocks plans moving forward is to continue accelerating investing in order to produce new features and products within its Conversational Commerce along with building and maintaining leadership.

Based on recent results, analysts have rated the stock a ‘Strong Buy’ with an average price target range of between $31 to $90, confirming a 67% upside from today's price of $53.65.

Whilst analysts are predicting that the stock will deliver an average annual earnings growth rate of 25% over the coming three years, revenue has also predicted to grow by a rate of 21.59%, leading revenue to hit $461.1 million for FY 2021.

In a world where digital-technology platforms are leading the way in every angle possible and following the successful year that LPSN has had in 2021, makes this stock a good small-cap investing option to add to your collection in 2021 and to potentially hold for many more years to come.

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8. Clearwater Paper (CLW) 

Clearwater Paper (CLW) is a premier private tissue and high-quality paper manufacturing brand that operates from various locations spreaded across the U.S.

In 2020 the tissue market was one market that looked set to rise due to the on-going Coronavirus pandemic, and the stock confirmed just how in demand tissue products were in 2020 as the company released its Fourth Quarter and Full Year 2020 results at the end of February.

Net sales grew by 6.1% to $1.9 billion compared to 2019, the stock delivered net income of $77 million compared to a new loss of $6 million in 2019, adjusted EBITDA of $283 million compared to adjusted EBITDA of $167 million in 2019, whilst the stock managed a reduction in net debt of $200 million over the year.

This strong demand in tissue has blown this stock to the opposite end of the scale over the past year and the stock is aiming to keep its eyes firmly set on the healthy and safety of its people along with continuing to supply and meeting consumer hygienic demands in 2021.

Despite the CLW good results over the year, the company has anticipated that the tissue market may well be volatile moving forward due to the ongoing Covid-19 virus and is expecting headwinds within the stocks first quarter due to this factor.

Analysts are still remaining positive on the stock with CFRA giving the stock a ‘Strong Buy' rating with a price target of $38, an upside of almost 11% from the stocks current price of $34.27.

CLW is sitting well in most key areas and has been forecast to potentially grow well in the long-term outlook by analysts if the stock continues to carry on performing and reducing debt levels it can look to increase and offer great value for its shareholders.

As the global tissue market has been predicted to reach $1.5 billion by 2027, CLW is a small-cap stock that is worth keeping an eye on in 2021.

9. Glatfelter (GLT) 

The last small-cap stock to make the list is Glatfelter (GLT).

Glatfelter Corp is a global manufacturer of specialty paper and engineered products such as personal hygiene products, tea and coffee filters and much more.

In recent times this stock has been making headlines as it continues its downward trend, but this stock is not one to dismiss off the radar just yet.

In 2020 the stock managed to remain in a similar position to FY 2019 in terms of its top-line growth, but has naturally witnessed some disruptions in 2020 due to the pandemic. But the stock does sit in a more healthy position within its balance sheet as confirmed in the Fourth Quarter and Full Year 2020 results, with cash and cash equivalents totaling to $ 99.6 million and net debt showing a decline to $213.9 compared to $233.7 million in 2019.

GLT is looking to expand its growth prospects in 2021 as it recently announced its acquisition of Nonwovens Corp, the leader in home and personal care product development in a deal worth a reported $175 million. This is a huge growth adventure for the stock as it looks to progress down the route of air-laid products which Nonwovens has its hands in firmly.

Some analysts are optimistic on GLT stock but most analysts covering the stock have issued a ‘Buy’ rating with a consensus price target of $21.00, a 33% upside from where the stock sits today at $15.75.

Glatfelter GLT stock is looking like it needs a little more time before investors will see the benefits that this company can offer as it continues to roll out its new strategic plans in entering into home products in 2021, but it is certainly a small-cap stock that is not to be overlooked in 2021.

Overview: 9 Small-Cap Stocks with Great Growth Potential 

Whilst investing in small-cap stocks does come with stronger risk factors, these stocks can offer many benefits for an investor, with their main benefit being that they grow significantly well leading to outperforming both large-cap stocks and the market in some cases to achieve great returns. 

One small-cap stock that sticks out on this list to strongly consider is Golden Nugget Online Gaming (GNOG). As the U.S continues to legalise online betting, this stock is sitting in a multi billion dollar industry that is set to soar in 2021 leading GNOG stock to potentially see returns that it has never before witnessed in the coming months leading into 2022.

Having said that, all of these 9 small-cap stocks with great growth potential all have proven that they have strong growth prospects looking ahead. As industry’s look set to open up and as consumer demands remain stronger than ever across various sectors, positions these small-cap stocks further under the spotlight in 2021.

But before you seek to potentially invest within these shining stocks it is worth conducting additional research before jumping straight in by sounding out any sudden changes that may have impacted the stocks future prospects and additionally investigating further into any underlying issues that may play a role within the stocks future.

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