When looking for big winners in the stock market, smaller is better. A gigantic firm like Apple (NASDAQ:AAPL) can realistically only go up so much in a given time period. Simply put, iPhone sales aren’t going to triple anytime soon. High-risk high-reward small-cap stocks, on the other hand, can have tremendous near-term upside if things go correctly for the company.
To be clear, these are the top small-cap stocks for people with strong stomachs. Volatility will be a given. And there is a real risk of failure if these companies aren’t able to deliver on their business models.
But, for investors willing to endure some risk, these high return small-cap stocks could be multi-baggers over the next few years. As such, let’s take a look at these three promising companies today.
Terran Orbital (LLAP)
Terran Orbital (NYSE:LLAP) is a high-risk high-reward small-cap stock focused on the space industry. At less than $1.25 per share and with a market capitalization of less than $200 million, Terran Orbital is a positively tiny company by Wall Street standards.
However, it has a ton going for it. It has a unique small satellite design, and is already in commercial production. Terran Orbital brought in $94 million of revenues last year. Defense contracting giant Lockheed Martin (NYSE:LMT) gave Terran the best sort of validation with a $100 million investment last year to bolster its manufacturing capacity.
Terran added to this momentum in February with a truly massive deal. It announced that it had signed a $2.4 billion contract with Rivada Space Networks for a total of 300 spacecrafts. This will include 288 low-earth satellites and 12 spare units. This is a simply stunning deal, with $2.4 billion coming in at more than 10 times today’s market capitalization for Terran Orbital.
There are still plenty of risks. Even with Lockheed’s investment, it appears Terran Orbital will need to raise a lot more capital to build out its manufacturing. Bank of America recently downgraded LLAP stock on financing risks. That said, the Rivada deal shows Terran’s tremendous potential. If management can build off of that momentum, the sky is the limit.
PacWest Bancorp (PACW)
PacWest Bancorp (NASDAQ:PACW) is a regional bank focused on the California market. After the failures of Silicon Valley Bank, First Republic Bank and several others, traders are looking for the next bank to sell short to zero.
PACW stock became one of the leading targets. Shares fell from a 52-week high of $32 to as low as $2.48 in recent weeks. It appeared that PacWest might not be able to survive.
However, PacWest shares have surged recently. The company’s deposit base hasn’t shrunk nearly as fast as the bears had predicted. The bank has posted collateral at the Federal Reserve to free up more liquidity. Meanwhile, PacWest was able to sell a hefty construction loan portfolio at only a modest loss, which gives it more capital to continue navigating through the current storm.
PacWest earned $5.10 per share in 2021 and $3.37 in 2022. Its profitability will be significantly hampered for the intermediate future given the deposit crunch and unfavorable interest rate environment. But if the bank can merely hold on and things start to normalize, shares should have tremendous upside from the current $7 stock price.
ClearPoint Neuro (CLPT)
ClearPoint Neuro (NASDAQ:CLPT) is a small biotech company focused on improving brain treatments. Specifically, it has the SmartFlow Cannula system which allows medical professionals to deliver drug therapies directly into the brain, bypassing the blood-brain barrier. This potentially has a wide range of clinical applications.
The SmartFlow Cannula system already has significant commercial traction with more than 5,000 units sold to-date. This figure should continue to grow as more companies develop approved treatments which utilize the Cannula system as the delivery mechanism.
For one recent example, PTC Therapeutics’ (NASDAQ:PTCT) Upstaza, which treats AADC deficiency, received approval in the EU and the United Kingdom last year. That makes it the first approved gene therapy to be injected directly into the brain, and it uses ClearPoint’s proprietary delivery technology. These sorts of drug approvals should lead to long-lasting revenue streams as ClearPoint locks itself in as the delivery mechanism for these cutting-edge brain therapies.
ClearPoint hasn’t yet reached profitability. However, the company grew revenues from $7 million in 2018 to $21 million last year, and its operating losses are shrinking. As more biotech firms have success, ClearPoint should be able to start making money and obtain a much higher valuation from the market for its cutting-edge drug delivery platform.
— Ian Bezek
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Source: Investor Place