In this article, we will look at the 10 Best Small-Cap Stocks Ready To Explode.
Prospects For Extended Outperformance Of Small-Cap Stocks
On October 7, Chuck Royce, founder and Senior Advisor, and Francis Gannon, Co-Chief Investment Officer and Managing Director of Royce Investment, discussed the outperformance of small-cap stocks. While discussing the reasons that led to the Russell 2000 Index doing well in Q3 ’24, Gannon noted that the strong performance of the Russell 2000 Index, which was up 9.3%, in the third quarter of 2024 can be attributed to a “quintessential reversion to the mean,” as small-caps had lagged behind larger companies for an extended period. He thinks that the rebound was not surprising given the historical trends, as the small-cap index outperformed the large-cap Russell 1000, up 6.1%, and the mega-cap Russell Top 50, up 4.2% during this time.
Read Also: 7 Best Nano Cap Stocks To Invest In and 10 High Growth Non-Tech Stocks That Are Profitable in 2024.
On the other hand, Royce mentioned that he was surprised by the concentration of the small-cap gains. He noted that all the gains for the quarter were compressed at the start, as by early July 16, the index had already achieved a 10.6% increase from the end of June, marking its high for the quarter. Royce further mentioned that this rapid ascent was followed by a notable decline, with the index dropping 10.1% from July 16 to August 7 before recovering most of its losses by the end of September. Despite this volatility, he expressed satisfaction with the small-cap performance overall for the quarter, especially since it marked a reversal after small-caps last outperformed large-caps in Q4 2023.
Building further upon the volatility of small-cap stocks, Royce expressed that while volatility in small-cap stocks can be concerning, it is a normal part of investing in this asset class. He emphasized that they welcome volatility as it allows them to take advantage of price fluctuations for long-term gains. Historically, significant intra-year declines are common for small-caps, with the Russell 2000 experiencing double-digit pullbacks in 22 out of the last 25 years.
While answering how the sector can sustain its market leadership performance, Gannon highlighted that market breadth among large caps often leads to better performance for small caps. He pointed out that when the equal-weighted Russell 1000 outperformed its capitalization-weighted counterpart, small-caps typically led in performance. This trend suggests that an expansion of returns across different sectors is a positive indicator for small-cap stocks.
Moreover, both Royce and Gannon stressed that earnings growth is crucial for the long-term success of small-cap stocks. Gannon stated that while short-term market psychology can influence stock prices, consistent earnings are fundamental for sustaining long-term performance. He noted that despite a significant portion of small-cap companies lacking earnings, around 44.6%, those with earnings are expected to grow faster than their large-cap counterparts in 2025.
With that let’s take a look at the 10 best small-cap stocks ready to explode.
A close-up of a computer screen with a graph of the CRSP US Small Cap Value Index.
Our Methodology
To curate the list of 10 best small-cap stocks ready to explode we used the Finviz stock screener and CNN. Using the screener we shortlisted small-cap stocks (market-cap between $500 million to $2 billion) for which analysts are expecting more than 50% upside from the current stock price. Once we had shortlisted the stocks we cross-checked the analysts’ upside potential from CNN. Lastly, we ranked the stocks based on the ascending order of the analyst upside potential. Please note that the data was recorded on November 15, 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Small-Cap Stocks Ready To Explode
10. Garrett Motion Inc. (NASDAQ:GTX)
Analyst Upside Potential: 52.87%
Garrett Motion Inc. (NASDAQ:GTX) is an automotive technology company based in Switzerland specializing in turbocharging and electric boosting technologies for vehicles. The company designs and manufactures turbochargers, which are devices that increase the power output of engines by forcing more air into the combustion chamber. They produce turbochargers for various types of engines, including those powered by gasoline, diesel, natural gas, and even hybrid or fuel cell systems.
In addition, the company also develops electric boosting technologies that enhance engine performance, particularly in electric and hybrid vehicles. This includes products like electric compressors and e-turbos that help improve efficiency and reduce emissions. Garrett Motion Inc. (NASDAQ:GTX) serves original equipment manufacturers (OEMs) and generates about 86% of its revenue from OEMs, while the other 14% of its revenue comes from the supply of aftermarket parts for vehicle repairs and upgrades. The company has a significant global footprint, with a network that spans over 165 countries.
Garrett Motion Inc. (NASDAQ:GTX) is making strides in both its turbocharger portfolio and electrified solutions. During its third-quarter conference call for fiscal 2024, the company announced that it had secured new contracts for its largest turbocharger, specifically designed for marine and auxiliary power applications, with production expected to commence in 2026.
Financially speaking, the fiscal third quarter of 2024 was a tough quarter for the company as net sales fell 14% year-over-year to $826 million. The decline was due to softness in Europe and China, topped with competitive pressure on global OEMs.
Alluvial Capital Management stated the following regarding Garrett Motion Inc. (NASDAQ:GTX) in its first quarter 2024 investor letter:
“Garrett Motion Inc. (NASDAQ:GTX) delivered nice results in February. The company issued strong guidance for 2024 and best of all, indicated it would use nearly all its 2024 free cash flow to repurchase stock. The company wasted no time, buying back a whopping 10 million shares for $90 million on March 6. Garrett will continue to harvest the cash flows from its dominant turbochargers business, investing in creating products for electric vehicles and returning excess cash to shareholders. Investors seem to be waking up to the reality that while electric vehicles are a near-inevitability, it will be a long time still before internal combustion engines lose their relevance. By the time they do, Garrett Motion will have completed the transition to an electric vehicle equipment manufacturer and will have returned billions in capital to investors.”
9. Arcos Dorados Holdings Inc. (NYSE:ARCO)
Analyst Upside Potential: 53.41%
Arcos Dorados Holdings Inc. (NYSE:ARCO) is the largest independent franchisee of McDonald’s in the world, primarily operating in Latin America and the Caribbean. The company has the exclusive rights to own, operate, and franchise McDonald’s restaurants in 20 countries across Latin America and the Caribbean, including major markets like Brazil, Mexico, and Argentina. It manages over 2,140 McDonald’s locations and employs more than 100,000 people.
During the fiscal third quarter of 2024, Arcos Dorados Holdings Inc. (NYSE:ARCO) demonstrated strong performance, showcasing the resilience of its business model despite economic challenges. The company achieved a new record high revenue for the third quarter which amounted to $1.1 billion and was up 39% year-over-year in constant currency. The increased revenue was due to a 32.1% rise in system-wide comparable sales, with positive contributions from both average check and guest volumes.
Arcos Dorados Holdings Inc. (NYSE:ARCO) has implemented a 3D policy that translates to focusing on Digital, Delivery, and Drive-thru. As a result of this policy, the company was able to increase its sales from digital channels by 16% year-over-year. Digital sales now account for 58% of total systemwide sales, reflecting a strong customer preference for online ordering and mobile app functionalities.
It is one of the best small-cap stocks ready to explode. Analysts’ 12-month median price target for the stock presents a 53% upside from current levels.
8. Sendas Distribuidora S.A. (NYSE:ASAI)
Analyst Upside Potential: 60.45%
Sendas Distribuidora S.A.(NYSE:ASAI) widely known as Assai Atacadista, is a Brazilian company focused on food distribution. The company operates through two main business segments: the Cash & Carry and Retail segment.
The Cash & Carry segment provides a self-service wholesale shopping experience. Customers, including small retailers and businesses, can buy a wide range of products in bulk at lower prices. Assai stores typically offer over 9,000 items, including groceries, beverages, personal care products, and cleaning supplies. Moreover, the Retail segment runs various retail operations such as hypermarkets, supermarkets, and convenience stores under different brand names. These include Exito and Carulla in Colombia, Devoto and Disco in Uruguay, and Libertad in Argentina.
Sendas Distribuidora S.A.(NYSE:ASAI) has been focused on opening new stores and expanding its reach to customers. During the first 9 months of 2024, management added 9 new stores with 4 stores opening in the third quarter of fiscal 2024. If we look at the past 12 months the company has opened 21 new stores adding more than 110,000 square meters to the sales area.
While new store openings are expected to boost sales and revenue generation, what’s more impressive is the fact that the company also grew its same-store sales by 2.6% year-over-year. Overall, the revenue for the quarter amounted to $3.51 billion indicating a 9.3% increase year-over-year.
Management attributed sales growth to continuous growth in customer visits. During the third quarter of fiscal 2024, around 40 million people visited its stores monthly throughout the quarter. Moreover, Sendas Distribuidora S.A.(NYSE:ASAI) has also been actively working towards debt reduction. It is one of the best small-cap stocks ready to explode.
7. Viridian Therapeutics, Inc. (NASDAQ:VRDN)
Analyst Upside Potential: 101.09%
Viridian Therapeutics, Inc. (NASDAQ:VRDN) is a biopharmaceutical company that specializes in developing new medicines for serious and rare diseases, particularly focusing on thyroid eye disease (TED). This condition is an autoimmune disorder where the immune system attacks the tissues around the eyes, leading to symptoms like swelling, redness, and vision problems.
The company has made significant progress in its clinical trials and financial positioning as of the third quarter of 2024. It reported successful topline results for Veligrotug for TED from the THRIVE trial, a phase 3 clinical study evaluating Veligrotug, an anti-insulin-like growth factor-1 receptor (IGF-1R) antibody. Viridian Therapeutics, Inc. (NASDAQ:VRDN) is also on track to release topline data from THRIVE-2, which focuses on chronic TED patients, in December 2024. This trial has already exceeded its enrollment target with 188 patients.
With respect to VRDN-003, which is another next-generation, subcutaneous anti-insulin-like growth factor-1 receptor (IGF-1R) antibody developed by Viridian Therapeutics, Inc. (NASDAQ:VRDN). The company launched two pivotal phase 3 trials, REVEAL-1 and REVEAL-2, to assess VRDN-003. Topline data from these trials is expected in the first half of 2026.
Moreover, in terms of cash position, the company reported cash and equivalents totaling $753.2 million as of September 30, 2024. The cash position was significantly bolstered by a public offering that raised $243.2 million in September 2024. Management believes that the funding is projected to sustain operations into the second half of 2027. It is one of the best small-cap stocks ready to explode as analysts’ 12-month median price target is pointing towards a 101.09% increase from the current levels.
6. Dynavax Technologies Corporation (NASDAQ:DVAX)
Analyst Upside Potential: 104.75%
Dynavax Technologies Corporation (NASDAQ:DVAX) is a commercial-stage biopharmaceutical company focused on developing and commercializing vaccines. Its primary product is HEPLISAV-B, a hepatitis B vaccine designed for adults aged 18 and older, which requires only two doses for effective immunization against all known subtypes of the hepatitis B virus. Additionally, the company also produces CpG 1018, an adjuvant that enhances the immune response and is used in HEPLISAV-B as well as in various COVID-19 vaccines. It is also working on a pipeline of new vaccine candidates targeting diseases such as shingles, tetanus, diphtheria, and plague.
Its HEPLISAV-B vaccine is a market differentiator. According to the company’s third-quarter report for fiscal 2024, the vaccine improved its United States market share from 41% last year to 44% during the most recent quarter. Due to the increase in market share of the vaccine, the net product revenue of HEPLISAV-B grew 27% year-over-year in Q3 2024 to reach $79.3M. Management is aiming to grow the market share of HEPLISAV-B to at least 60% by 2030.
The company has been growing its top and bottom line at a steady pace. During the third quarter, its total revenue improved 16% year-over-year to reach $80.6 million. Whereas, its net income grew by 23% year-over-year to reach $17.6 million. Management believes that Dynavax Technologies Corporation (NASDAQ:DVAX) is on track to achieve net product revenue of $265 million to $270 million for HEPLISAV-B and that too at around 80% gross margins during 2024. Moreover, they also expect the net income to remain positive during the rest of the year.
In addition, analysts’ 12-month median price target is pointing towards a 104.75% upside from the current levels making it one of the best small-cap stocks ready to explode.
5. Neumora Therapeutics, Inc. (NASDAQ:NMRA)
Analyst Upside Potential: 112.18%
Neumora Therapeutics, Inc. (NASDAQ:NMRA) ranks as the 7th best small-cap stock ready to explode. Analysts’ 12-month median price target is pointing towards a 112.18% upside from current levels. It is a biopharmaceutical company focused on developing new treatments for brain diseases. It operates in the clinical stage, meaning it is working on medications that are being tested in humans to see if they are safe and effective.
The company has a pipeline of seven programs aimed at treating various neuropsychiatric disorders (like depression and schizophrenia) and neurodegenerative diseases (such as Alzheimer’s). These programs explore new ways to interact with the brain’s chemistry to improve treatment outcomes for conditions that currently have limited options.
One of their main drug candidates is navacaprant (NMRA-140), which is designed to treat major depressive disorder (MDD). This medication works by blocking specific receptors in the brain that are linked to mood regulation. During the third quarter results for fiscal 2024, Neumora Therapeutics, Inc. (NASDAQ:NMRA) announced that it is currently enrolling in the registrational Phase 3 KOASTAL program, which is designed to evaluate the efficacy and safety of navacaprant monotherapy for the treatment of MDD. Management expects topline data from the program by the end of 2024 and topline results from KOASTAL 2 and KOSTAL 3 programs during the first half of 2025.
NMRA-140 is a significant treatment for the company as it treats MDD, as per management statistics MDD is a leading cause of disability around the world, and around 280 million people suffer from the disease worldwide. NMRA-140 has the potential to reshape the treatment of depression. Neumora Therapeutics, Inc. (NASDAQ:NMRA) believes that its pipeline has the potential to reach up to 40 million patients in 2026 bringing significant revenue as it enters the commercial stage.
As of November 12, the company had $341.3 million in cash, cash equivalents, and marketable securities, which the management believes is sufficient to support operations into mid-2026.
4. Evolent Health, Inc. (NYSE:EVH)
Analyst Upside Potential: 118.09%
Evolent Health, Inc. (NYSE:EVH) is a healthcare company that specializes in connecting care for individuals with complex medical conditions, such as cancer, cardiovascular diseases, and musculoskeletal issues. The company operates through three main business segments including, Medicaid, Medicare, and Commercial and Other. It generates revenue from the fees of the services it provides to healthcare providers and payers under various contracts.
The company is riding the tailwind from improving the macroeconomic environment and Federal Reserve rate cuts. During the third quarter of fiscal 2024, Evolent Health, Inc. (NYSE:EVH) announced that its revenue for the quarter improved 28% year-over-year to reach $740 million. Management also announced six new revenue agreements during the quarter, these agreements are expected to contribute over $200 million in incremental annualized revenue. Moreover, this was also a record number of agreements signed in a single quarter in the company’s history.
Its Performance Suite, which integrates clinical pathways, technology, and financial incentives to improve patient outcomes while controlling healthcare costs, was the major revenue driver. The Performance Suite improved 77.05% year-over-year due to a significant increase in product lives because of the growth of oncology and cardiology risk clients.
Evolent Health, Inc. (NYSE:EVH) ranks as the 4th best small-cap stock ready to explode as analysts’ 12-month median price target is pointing towards a 118.09% upside from the current levels.
Carillon Eagle Small Cap Growth Fund stated the following regarding Evolent Health, Inc. (NYSE:EVH) in its Q2 2024 investor letter:
“Evolent Health, Inc. (NYSE:EVH) is a leader in value-based care. It leverages a unique platform and AI technology to assist physicians in delivering efficient care plans for patients with cancer, cardiovascular disease, and complex musculoskeletal conditions, thereby reducing medical costs. Despite recent stock pressure due to higher than expected care levels depressing gross margins, the company’s contracts with managed care organizations ensure compensation adjustments, keeping Evolent on track for a healthy earnings before interest, taxes, depreciation, and amortization (EBITDA) run rate by the end of the year. Given its severe undervaluation, Evolent could potentially attract acquisition interest from private equity or managed care organizations.”
3. Immunocore Holdings plc (NASDAQ:IMCR)
Analyst Upside Potential: 121.59%
Immunocore Holdings plc (NASDAQ:IMCR) is a biotechnology company based in the United Kingdom that focuses on developing innovative treatments for various diseases, primarily using a technology called T cell receptor (TCR) bispecific immunotherapies. This technology aims to harness and enhance the body’s immune system to fight against diseases like cancer, autoimmune disorders, and infectious diseases.
KIMMTRAK is the lead product of Immunocore Holdings plc (NASDAQ:IMCR), the product has been approved for treating a specific type of eye cancer called unresectable or metastatic uveal melanoma. It is currently available in the United States and the European Union.
During the third quarter of 2024, the KIMMTRAK net revenue improved 28% year-over-year to reach $80.2 million, driven by higher demand in the United States and Germany. The growth was also aided by 11 new launches during the year aimed at expanding patient reach for the drug. To date, the product has been approved in 38 countries and has been launched in 21 countries globally.
Immunocore Holdings plc (NASDAQ:IMCR) has a robust pipeline of products currently in the clinical stage including brenetafusp, which is a treatment for melanoma, a type of skin cancer. Brenetafusp is in Phase 3 trials and is set to start randomizing patients in the fourth quarter of 2024.
Analysts’ 12-month median price target for the stock is pointing towards a 121.59% upside from current levels, thereby making it one of the best small-cap stocks ready to explode.
2. Enovix Corporation (NASDAQ:ENVX)
Analyst Upside Potential: 135.85%
Enovix Corporation (NASDAQ:ENVX) is a company that specializes in creating advanced batteries, specifically lithium-ion batteries that use silicon instead of traditional graphite. The company exercises its strategic edge over its customers by manufacturing batteries that can store significantly more energy compared to standard lithium-ion batteries. Moreover, their batteries are designed in a way that not only enhances energy capacity but also maintains safety standards, which is crucial for consumer electronics and electric vehicles.
The batteries developed by Enovix Corporation (NASDAQ:ENVX) have both consumer and industrial applications as it designs batteries for daily use devices including smartphones and laptops and for industrial usage including electric vehicles.
Enovix Corporation (NASDAQ:ENVX) has made significant strides in its business during the third quarter of fiscal 2024, focusing on scaling its operations and enhancing its market presence. It inaugurated its new manufacturing facility, Fab2, in Malaysia. This facility is designed to ramp up production capabilities, and it has already started shipping battery cells to customers. Moreover, the company also secured a development agreement with a leading smartphone manufacturer to qualify their battery products for mass production, expected to begin in late 2025.
During the quarter it generated $4.3 million in revenue marking a 2,058.50% increase year-over-year. Looking ahead management is expecting Q4 revenue to be $8.0 million and $10.0 million. It is one of the best small-cap stocks ready to explode as analysts’ 12-month median price target is pointing towards a 135.85% upside from current levels.
Massif Capital Real Assets Strategy stated the following regarding Enovix Corporation (NASDAQ:ENVX) in its Q2 2024 investor letter:
“Enovix Corporation (NASDAQ:ENVX): Enovix is perhaps a bit of an outlier in our portfolio given that it is a battery manufacturer selling into consumer goods markets, but it fits nicely in what we believe to be the Massif Capital analytical sweet spot, businesses where science/technology, geopolitics/geoeconomics and energy/materials overlap. While some would argue that Enovix is inappropriate for a liquid real asset portfolio, the traditional definition of real asset businesses is dated.
Traditionally, real asset businesses are those that own and operate real estate, infrastructure, and natural resource assets. While this definition is workable, and most of the companies we invest in fall into one of these categories, it does not consider the ever-growing role of applied physical sciences in specific manufacturing fields, nor does it take into account the growing importance of material sciences and the changing nature of energy in general. Enovix is a material sciences business aiming to transform an ever-growing list of unique, highly refined materials into energy storage devices. They create value by understanding materials’ physical and electrochemical properties better than others…” (Click here to read the full text)
1. Arvinas, Inc. (NASDAQ:ARVN)
Analyst Upside Potential: 166.90%
Arvinas, Inc. (NASDAQ:ARVN) is a clinical-stage biotechnology company that ranks 4th on our list of 10 best small-cap stocks ready to explode. Analysts’ 12-month median price target for the stock is presenting a 166.90% upside from current levels. The company engages in developing treatments for patients with cancer and other neurodegenerative disorders. The company uses a special technology called PROTAC (proteolysis-targeting chimeras). This technology helps the body’s systems to identify and eliminate disease-causing proteins more effectively.
Several products of Arvinas, Inc. (NASDAQ:ARVN) including ARV-471, ARV-766, and ARV-102 are at different stages of their clinical trials. The company made significant progress in its drug development efforts and reported positive developments across its drug portfolio during the third quarter of 2024. For instance, it is on track to release important results from a major clinical trial (VERITAC-2) for breast cancer treatment by late 2024 or early 2025.
Moreover, they are also working closely with Pfizer to potentially change how ER+/HER2- breast cancer is treated, indicating a promising partnership aimed at improving patient care. Looking ahead, Arvinas, Inc. (NASDAQ:ARVN) plans to complete patient enrollment for several trials by the end of 2024 and expects to share data from these studies in 2025. Management is also preparing to start new combination trials for breast cancer treatments.
Financially speaking, the company generated $102.4 million in revenue during the quarter, a substantial increase from $34.6 million in the same quarter of 2023. The revenue growth was driven by a notable contribution of $76.7 million from a licensing agreement with Novartis.
While we acknowledge the potential of Arvinas, Inc. (NASDAQ:ARVN) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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