While the traditional approach to market success calls for patiently investing in reliable blue chips, those that want to see more immediate gains may consider small-cap stocks to buy. Here, the point is about accepting massive risk to hopefully realize massive rewards. At the same time, these lower-volume enterprises can be volatile, making this category inappropriate for the faint of heart.
On the optimistic side of the equation, few other investment categories offer the upside reward potential of small-cap stocks. Because fewer people know about these enterprises, should a wave of knowledge break out, the underlying securities might skyrocket. It’s not unusual to see sizable double digit or even triple-digit returns within a 12-month period.
On the other hand, speculative small-cap stocks can be incredibly risky. Circumstances might not pan out so well, causing investors to rush for the exits. Unfortunately, we’re often dealing with low-volume entities, the jettisoning may yield devastating red ink. You can’t take the good without the bad. Still, it’s an exciting way to make money. If you can handle the pressure, these are the speculative small-cap stocks to buy.
Small-Cap Stocks to Buy: Hibbett (HIBB)
Right off the bat, Hibbett (NASDAQ:HIBB) makes for a wildly risky example of small-cap stocks to buy. Sure, it could make you rich but you should never forget that it could land you in the poor house. A casual and athletic wear and accessories retailer, HIBB depends largely on the consumer economy. Frankly, I’m not entirely sure if has the right stuff to remain viable in a difficult environment.
Interestingly, though, investment resource Gurufocus identifies six good signs with Hibbett Sports. These include operating margin expansion and a strong Altman Z-Score of 4.95, indicating high fiscal stability. About the only not-so-great sign is insider selling transactions. Still, insiders exiting doesn’t really tell the whole story.
Plus, HIBB seems undervalued. Right now, the market prices shares at a forward multiple of 5.45. As a discount to projected earnings, Hibbett ranks better than 95.96% of its peers. Finally, Wall Street analysts peg HIBB a consensus strong buy. Their average price target lands at $79.83, implying over 56% upside potential.
Small-Cap Stocks to Buy: Inogen (INGN)
Headquartered in Goleta, California, Inogen (NASDAQ:INGN) provides portable oxygen concentrators. According to its website, Inogen has been in business for over 20 years. Since that time, it sold more than one million units of these concentrators in 45 countries. Although quite promising, INGN ranks among the speculative small-cap stocks to buy. Since the start of the year, INGN fell nearly 44%. In the trailing one-year period, it’s down almost 55%.
To be sure, the negativity isn’t entirely unjustified. For one thing, Gurufocus labels INGN a possible value trap. In particular, both the company’s operating and net margins slipped into negative territory. Also, its three-year revenue growth rate of only half-a-percent fails to generate confidence. At the same time, patience might be warranted, at least among market gamblers. That’s because Inogen enjoys a decent balance sheet. Its cash-to-debt ratio pings at 7.67, better than 64% of its peers.
Lastly, covering analysts peg INGN a moderate buy. Their average price target comes in at $18.67, implying over 67% upside potential.
Small-Cap Stocks to Buy: Vimeo (VMEO)
Early this year, video services platform Vimeo (NASDAQ:VMEO) announced significant cuts to its workforce. Citing requirements to meet growth and sustainable profitability goals, the company had to let go of 11% of its employees. While VMEO got off to a strong start for the year, it quickly faded from its peak closing price (in 2023) of nearly $5.
Still, Vimeo could make a case for speculative small-cap stocks to buy. Near the beginning of May, the video services specialist disclosed its first-quarter earnings results. Notably, the enterprise posted revenue of $103.6 million, which while down 4.4% against the year-ago quarter managed to beat analysts’ consensus view by 1.5%.
Also, according to Gurufocus, Vimeo carries no debt on its balance sheet. This status affords the company incredible flexibility at an especially vulnerable time. Also, its three-year revenue growth rate of 31% beats out 85.52% of the competition. To close, analysts peg VMEO a moderate buy. Their average price target clocks in at $6.25, implying over 71% upside potential. Thus, it’s an enticing example of speculative small-cap stocks to buy.
Small-Cap Stocks to Buy: 1-800-FLOWERS.com (FLWS)
Perhaps an odd choice for small-cap stocks to buy, 1-800-FLOWERS.com (NASDAQ:FLWS) nevertheless deserves consideration for those who think outside the box. A floral and foods gift retailer and distribution firm, Flowers makes for a sensible choice during major holidays. However, it’s been trudging along in the positive direction this year, gaining 4% since the January opener. In the trailing year, it’s down just over 1%.
Financially, Flowers offers an enticing profile. On the operational side of the equation, the company posts a three-year revenue growth rate of 21.4%, above 84% of its rivals. Also, its book growth rate during the same period comes out to 14.1%, above 75.2%. Enticingly, the market prices FLWS at 0.28-times trailing sales. As a discount to the top line, Flowers ranks better than 75.74% of companies listed in the cyclical retail industry.
Turning to Wall Street, analysts peg FLWS as a consensus moderate buy. On average, their price target stands at $18, implying slightly over 81% upside potential.
Based in San Francisco, California, NerdWallet (NASDAQ:NRDS) is a personal finance company founded in 2009. Per its public profile, NerdWallet earns money by promoting financial products to its website and app users. Though intriguing and relevant, NRDS ranks among the top speculative stocks to buy. Since the Jan. opener, NRDS slipped 7%. Just in the trailing one-month period, it’s down almost 39%.
What didn’t help NerdWallet’s cause was a price target trim by Morgan Stanley analysts to $12 from $13. However, contrarians might see something worthwhile here (as a market gamble of course). First, the company commands excellent strengths in the balance sheet. It has zero debt and an Altman Z-Score of 5.81, indicating high fiscal stability and low bankruptcy risk. Also, its three-year revenue growth rate pings at 23.8%, above 84.54% of the competition. And NRDS happens to be priced at 1.16-times trailing sales, which is undervalued.
Looking to the Street, analysts peg NRDS a moderate buy. Their average price target clocks in at $17.29, implying 93% upside potential.
Semler Scientific (SMLR)
Hailing from Santa Clara, California, Semler Scientific (NASDAQ:SMLR) leads the way in portable peripheral arterial disease (PAD) testing, which may help to better guide patient care, according to its website. PAD is a serious risk factor for anyone age 50 and older. Further, 20% of the population that’s age 60 and older has PAD. Therefore, Semler benefits from a sizable addressable market.
However, it’s a volatile example of small-cap stocks to buy. Since the January opener, SMLR slipped more than 3%. Yet in the trailing one-year period, shares gained over 7% of equity value. Adding to the ambiguity, Gurufocus labels Semler as a possible value trap. Still, there are reasons to believe SMLR ranks among the speculative small-cap stocks to consider. First, Semler carries a robust balance sheet. Notably, its Altman Z-Score hits a stout 17. Second, on the operational side, the company’s three-year revenue growth rate pings at 20.2%, outflanking 77.22% of the competition.
Lastly, Lake Street’s Brooks O’Neil pegs SMLR a buy. The expert forecasts a $65 price target, implying almost 113% upside potential.
Cara Therapeutics (CARA)
Easily the riskiest idea among speculative small-cap stocks, Cara Therapeutics (NASDAQ:CARA) isn’t for the faint of heart. I’m serious. Since the beginning of this year, CARA hemorrhaged nearly 62% of equity value. While circumstances improve in the trailing-year framework, it’s still bad at almost 50% down. While Cara focuses on advanced therapies for people suffering from chronic pruritus, the market hasn’t responded well to the enterprise.
Understandably, Gurufocus labels CARA a possible value trap. However, those willing to roll the dice might want to take a closer look at the biotechnology firm. For one thing, Cara commands a cash-to-debt ratio of 75.81, above 75.32% of the field. Also, its equity-to-asset ratio pings at 0.87, above the sector median of 0.7 times.
On the operational front, Cara’s three-year revenue growth rate clocks in at 18.7%, above 63.87% of its peers. Its EBITDA growth rate during the same period is 14.6%, above 60%. On a final note, analysts peg CARA as a moderate buy. Their average price target stands at $18.57, implying nearly 343% upside potential. Thus, it’s one of the small-cap stocks to buy for extreme speculators.
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.