7 Small Cap Growth Stocks With Multibagger Potential

The Federal Reserve’s hawkish stance has created opportunities for investors to pick up a few multibagger small-cap growth stocks. These picks are generally riskier than mid- and large-cap stocks. Naturally, small cap stocks are associated with companies seeking stability and expansion. However, they generally have multibagger potential and could reward shareholders significantly in the future.

However, these stocks tend to be more volatile, which is why diversity is essential in managing the risks associated with such investments. A well-balanced portfolio has a place for small caps, mega caps and other stocks.

With market sluggishness today, now may be the best time to invest in multibagger small cap growth stocks for strong upside potential. Here are seven that are arguably the best picks and are trading at multi-year lows.

Multibagger Small Cap Growth Equity: FutureFuel (FF)

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FutureFuel (NYSE:FF) is an American manufacturer of diversified chemicals and bio-based specialty chemicals. He operates a stable biofuels and chemicals business that continues to generate healthy free cash flow and reward shareholders with strong dividends. FF shares currently offer an attractive dividend yield of 3.15%.

FF’s chemicals business continues to show green shoots, but rising commodity prices have hurt margins in its biofuels business. Therefore, it went to a loss from a profit last year for the second quarter. Additionally, it generated robust sales of $117.8 million, representing a growth of nearly 59% over the prior year period. Plus, with stocks trading at just 0.91 times sales, it’s an attractive choice for long-term growth.

Celestica (CLS)

silhouettes of a forklift and a driver and two workers by a semi-truck on the background of the sunset sky.  represents the supply chain

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Celestial (NYSE:CLS) provides supply chain solutions to original equipment manufacturers. Its portfolio of lifecycle solutions has been remarkably popular over the years and continues to gain momentum with each passing quarter. Additionally, it has a strong cash position of $365 million, with $286 million in debt.

It operates two main segments, which include cloud connectivity and advanced technology solutions. Both of these segments recorded double-digit sales growth during the second quarter. Subsequently, it raised its full-year forecast by $200 million to $6.7 billion for the year. Moreover, it ended the quarter with a good return of 9.7% on invested capital. As we move forward, the combination of margin and revenue growth will result in strong price gains for its stock.

Multibagger Small Cap Growth Equity: AMMO Inc. (POWW)

Many background ammunition bullets

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Ammunition Crafting Specialist AMMO inc. (NASDAQ:POWW) is a rare example of monumental success in a traditional industry. It has increased its sales by 234.5% over the past five years, which is a head and shoulders above its competitors. Still, the shares are trading at very attractive levels and could be clawed back for a few changes.

The sector is benefiting enormously from the strong demand and supply chain issues. This unique combination has resulted in a stunning 363% increase in EBITDA over the past 12 months. On top of that, its revenue exceeded historic levels by around 158% on an annual basis.

Hope Bancorp (HOPE)

A customer makes a transaction in a bank

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Hope Bancorp (NASDAQ:HOPE) provides banking services to the growing Asian American community in the United States. Moreover, it also boasts a relatively impressive dividend profile with a yield of 3.6% and a payout ratio of over 30%.

Its second quarter results were promising; revenue increased 12.1% to $154.3 million. Additionally, it recorded net recoveries of $930,000, the third consecutive quarter of total recoveries.

Due to rising interest rates, the growth of its interest-bearing loans has slowed considerably. However, growth in non-interest bearing deposits and floating rate loans compensated for the lack of growth. With flat month-over-month inflation rates in July and unemployment rates back to pre-pandemic levels, the company’s loan growth could begin to shift north again.

Multibagger Small Cap Growth Equity: Perion network (PERI)

peri stock: the Perion logo on the side of a building

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Perion network (NASDAQ:PERI) is an ad-tech platform specializing in display advertising via connected TV and search via Microsoft (NASDAQ:MSFT) Bing search engine. Its CEO’s efforts to streamline the company have unlocked a lot of value for investors.

A few catalysts are likely to boost the long-term potential of PERI stock. First, its SORT technology has grown in popularity in recent quarters. alphabetical (NASDAQ:GOOGNASDAQ:GOOGL) Google plans to stop using cookies in an attempt to assuage data privacy concerns. Perion’s SORT technology effectively addresses these concerns and could become the go-to option for marketers. A testament to its success is a 62% customer growth in the second quarter.

Perion delivered virtually every metric in its second quarter results. However, a key outlier was its video revenue which grew 273% on a yearly basis. Video advertising could grow dramatically by 41.1% from 2021 to 2027, indicating a massive growth avenue for Perion.

Mesabi Trust (MSB)

A pile of iron ore pellets on a black background.

Source: Shutterstock

Shares of Mesabi Trust (NYSE:ESM) took a beating following a dispute with the steelmaker Cleveland Cliffs (NYSE:FLC). Mesabi derives a healthy royalty stream from one of the iron ore mines operated by the latter company. Revenue rose more than 129% on strong iron ore prices, but Cleveland-Cliffs plans to cut supply as a negotiating tactic to reduce royalty payments. While MSB may face some short-term issues in this regard, it is unlikely to face any lingering long-term issues.

For starters, Cleveland-Cliffs spent a ton of money on the mine and touted it as a major source of competitive advantage. Moreover, it constitutes a small part of its overall income and, with rising iron ore prices, it seems unlikely that the steelmaker will significantly limit its production. Therefore, Mesabi should win big in the long run and reward shareholders with an even higher yield than the 12.3% it currently offers.

Multibagger Small Cap Growth Equity: Bassett Furniture (BSET)

Showcase Bassett Furniture Industries in Ohio.  BSET stock.

Credit: Eric Glenn/Shutterstock

Bassett Furniture (NASDAQ:BSET) is a Virginia-based furniture manufacturer, retailer and wholesaler. He has had an excellent track record of growing sales and profits at an extraordinary rate. 2021 was its best year, where it achieved an astonishing revenue of $487 million, a 26% improvement over the prior year period.

It recorded sales of $128.7 million in the second quarter, an increase of $18.7 million from the same quarter last year. Retail and wholesale sales improved by double digits, while its order books are expected to remain strong at least into the early fall. In managing its business risks, it has significantly improved its organization in the wholesale market and exposed its products to a diverse set of retailers and designers. All the while, BSET shares are trading at just 0.4 times the company’s value over sales. Additionally, it increased its dividend by an incredible 14% to 16 cents per share.

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As of the date of publication, Muslim Farooque had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Muslim Farooque is a passionate investor and an optimist at heart. A long-time gamer and tech enthusiast, he has a particular affinity for analyzing tech stocks. Muslim holds a Bachelor of Science in Applied Accounting from Oxford Brookes University.

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