Small-Cap Sovereigns: 3 Stocks Poised to Reign Over the Competition

Stocks to buy

Small-cap stocks continue to shine as potent growth opportunities for those willing to stomach the risk.

The current market dynamics bode well for stocks with market capitalizations between $300 million and $2 billion. While small-cap stocks are often perceived as high-risk investments, they’re often companies that are dominating their relevant niches. 

That said, I’ve curated a list of three attractive small-cap stocks that offer a ton of upside potential. Despite their size, these businesses are remarkably innovative and have shown robust fundamental improvements of late. Additionally, you can scoop all three for a little over $100, adding significantly to their attractiveness.

Hence, in a market landscape that’s ripe for strategic diversification, betting on small-cap stocks should take your portfolio to the next level. As we explore the dynamics of risk and return, consider adding these three relatively underappreciated stocks to your investment portfolio.

Planet Labs (PL) 

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Planet Labs (NYSE:PL) is redefining geospatial intelligence through its cutting-edge climate monitoring, agricultural optimization, and zoning planning technology. Despite its unique competencies, PL stock has taken a hammering over the past couple of years. Nevertheless, its underlying business continues to impress, which has had Wall Street analysts taking notice. It attracts a consensus strong buy rating from eight Wall Street analysts, offering a 121% upside potential.

The firm is coming off to a solid year, with revenues hitting a record $220.7 million in fiscal 2024, a tremendous 15% jump from the previous year. The fourth quarter alone brought in $58.9  million, bolstered by robust demand from government sectors, particularly in defense and intelligence.

The momentum carried over to its Q1 fiscal 2025 results. Its non-GAAP EPS of negative five cents outperformed estimates by one cent. Revenue climbed to $60.44 million, marking a 14.7% year-over-year increase while edging past forecasts by $0.41 million. Additionally, its customer base surged 14% to 1,031, while its adjusted EBITDA loss of $8.4 million narrowed substantially from its $19.1 million loss in the prior-year period.

MoneyLion (ML)

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MoneyLion (NYSE:ML) is a formidable player in the fintech space, offering a suite of integrated consumer finance solutions. Its array of in-house and partner services includes banking, loans, and personal finance management, among others. 

Despite being just a decade into the business, MoneyLion has effectively carved a niche in the competitive fintech sphere. This is evident from its eye-catching run-up in value last year, with it gaining a whopping 621%. Moreover, year-to-date, the stock is up 41% on the back of its strong operating results. It has blown past top-line estimates in five out of the past six quarters, posting double-digit growth. 

Its Q1 report showed its EPS jumping 146.5% to 60 cents from a negative $1.29 in the prior-year period. Moreover, sales shot up 36% to $121 million, beating estimates by $4.69 million. Additionally, total originations jumped from $506 million to $717 million, showing a stellar increase in the value of its loans and financial products. Following its upbeat results, Wall Street forecasts a 30% upside from current prices, rating it as a consensus strong buy.

Aris Water Solutions (ARIS) 

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Aris Water Solutions (NYSE:ARIS) is a top player in the booming energy water recycling market, with stellar growth prospects. It has quickly established its leadership position in water desalination and purification technology, which is reflected in its strong financial results. Its sales grew from $118.8 million in 2019 to almost $400 million last year. Moreover, its operating income rose from $10.4 million to $83.6 million over the same time period. 

It carried its fine form into 2024, wrapping up another solid Q1. ARIS posted $103.4 million, bested top-line estimates by $6.97 million. Moreover, its non-GAAP EPS of 34 cents outperformed forecasts by 10 cents, resulting in a 16.7% increase in its quarterly dividend.

Moreover, with a powerful $345 million cash reserve, ARIS has ample flexibility for continued expansion in shareholder returns. Aris Water Solutions stands poised for sustained long-term growth with a clear trajectory for steady margins and increased generated water volumes.

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

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.

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