Many S&P 500 firms have reported low earnings and a problematic outlook for this year. Since the pandemic, the stock market's volatility has affected investors. People are cautious about their investments, more now than ever. Fortunately, there are several alternatives to these famous names. Small-cap companies offer great investment opportunities to those looking for consistent returns and long-term growth potential.
The best part is that these companies remain immune to the political shocks and surprising news that may affect larger organizations. The expanding businesses are also highly likely to offer better dividend yields and returns. Below we've compiled a list of the ten such small-cap stocks with the potential for tremendous growth. Let's take a look.
1. Diversey Holdings Ltd.
Known for its cleaning, sanitation, and hygiene products, Diversey Holdings is the second largest company to serve this industry after Ecolab. Despite being the second largest organization, Diversey Holdings is much smaller and less profitable than Ecolab. It's valued at $2 billion, while Ecolab's valuation is $40 billion. The company has gone public after being managed privately. Diversey Holdings' shares declined by 60%, the effect of which was visible in its share price. But Diversey's stock value might surge with its primary customers—restaurants and food service businesses—recovering from the pandemic.
2. First of Long Island Corp
Established in 1927, the First of Long Island Corp has served the New York metro area for almost a century. It's different from other regional banks in that it focuses entirely on real estate
transactions. The bank lends money for an apartment's construction, purchase, and remodeling, and it doesn't offer short-term loans, car loans, or any credit. Its shares yield 4.8%, which is quite appealing to investors.
3. Fastly Inc.
This cloud infrastructure project management business has only sometimes been a small-cap stock. The company's shares reached a whopping $120 per share when the tech sector grew. The high demand for cloud computing services made Fastly one of the famous firms in the tech industry. However, its stock price is down 90% from its pandemic peak. Unfortunately, the high and unmanageable operating costs didn't support the company's growth. Still, fastly reports $400 million in annual revenue, projected to grow by double digits. Its recent market capitalization has dropped to $2 billion.
4. Ruth's Hospitality Group Inc.
Ruth's Hospitality Group is one of the biggest steakhouse dining firms in the US. With 150 domestic restaurants, it operates throughout the US and has 23 restaurants in international countries, including Japan and Singapore. It reported a 13.8% surge in its restaurant sales in 2022, hitting $475.4 million. This growth will continue in 2023 as restaurants recover from the pandemic. Besides that, Ruth's Hospitality has changed its services—from being a dine-in company to offering digital services. Although its shares plummeted briefly as beef's price increased, it's projected to grow once the inflation recedes.
5. Beazer Homes USA Inc.
This home construction company has had its ups and downs during the pandemic, just like other small-cap stocks on this list. They operate in 20 metropolitan cities in the US. Beazer had its boom period when the housing demand surged, and the economy's condition was good. Still, with the rising inflation and soaring interest rates, people's ability to afford homes has been affected. As a result, Beazer has reported a 2% drop in its annual revenue, and it's recovered the loss by increasing its selling price by 22%.
America's famous automotive and energy storage firm, Proterra, is a small-cap stock for investors looking for stable income. Although its shares witnessed a downfall in 2022, the company is recovering quickly. Having delivered more than 700 buses, Proterra has become a leading electric bus supplier throughout America. With the government and citizens' focus shifting to reduced emissions, the demand for electric vehicles has surged. The company targets $2.5 in income for 2025. Overall, it's a good buy for long-term growth-oriented investors.
7. Pactiv Evergreen Inc
With a market capitalization of $2 billion, Pactive Evergreen reported a whopping revenue of $6 billion. It's a product packaging service provider that offers lids, cartons, food containers, and other items in this category. Pactiv provides a 3.6% dividend yield. Despite being a low-margin business exposed to high competition, Pactiv Evergreen has performed well in its revenue.
8. Delek US Holdings
Delek US Holdings, the owner of the four refineries in southern America, deals in oil transportation. The refined goods industry witnessed a boom period allowed by an economic decline, and 2022 was an excellent year for the industry as the demand for petroleum products increased. With a market capitalization of $1.37 billion, Delek US Holdings is a good investment for this year.
Altimmune has a market capitalization of just $233.58 million, far smaller than other famous names on this list. But the company has made huge claims, which can increase its revenue and profitability drastically. It gained popularity after conducting a clinical test for obese and diabetic patients. Altimmune claims that its drugs for obesity are highly effective and can be a non-invasive alternative to bariatric surgery. With its Phase I clinical trial declared victorious, the company's claims regarding its drug's potential have reached a different level.
10. Butterfield Bank
Based in Bermuda, Butterfield Bank is a specialty bank that serves isolated areas, including Cayman, Channel, and Bermuda Islands. A significant portion of its revenue is generated from its fees, which insulates it from the risk associated with fluctuating interest.
It also receives limited competition, as the wealthy clients in these isolated areas only have a few options for banking. Butterfield Bank might only maximize your returns after some time, but given its 4.7% dividend yield and market dominance, this financial institution is an excellent option for portfolio diversification.
These were the top 10 small-cap stocks for growth-oriented investors. You can research these companies in detail to learn more about their work and past performances and make an informed decision.