Investing in established stocks can help you earn positive returns for your portfolio. However, some investors prefer to take on a higher level of risk in the hopes of significantly outperforming the stock market.
According to the Securities and Exchange Commission, micro-cap stocks have a market capitalization of less than $250 million or $300 million. Stocks with a market capitalization of less than $50 million are sometimes called “nanocap stocks.” If micro-cap stocks gain traction, they can significantly exceed the S&P 500’s return. For some investors, that’s worth the risk-versus-reward tradeoff.
Although it’s no longer a micro-cap stock, the recent rise of Direct Digital Holdings Inc. (ticker: DRCT) illustrates how this can happen. The advertising platform company’s stock is up by 1,026% since Nov. 1, 2023, as its market cap quickly soared above the $300 million threshold to $413 million as of March 26.
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For every Direct Digital Holdings, however, there are many more micro-cap stocks that collapse and hurt long-term investors. DRCT also has to demonstrate through strong financials that it can maintain its current gains instead of having a big spike followed by a big fall.
Micro-cap stocks receive less media coverage, which makes it harder to do research on them. You will have to review a micro-cap stock’s data and “investor relations” information to determine if the investment makes sense for your portfolio.
These are some of the micro-cap stocks that have potential to deliver positive returns in 2024. But because these stocks are often risky, it’s important to seek the advice of a financial advisor and do your due diligence before investing your money.
| Micro-cap stock | Market cap as of March 26 |
| Rekor Systems Inc. (REKR) | $158 million |
| M-tron Industries Inc. (MPTI) | $78 million |
| QuickLogic Corp. (QUIK) | $230 million |
| ReposiTrak Inc. (TRAK) | $292 million |
| Autoscope Technologies Corp. (OTC: AATC) | $36 million |
| Alarum Technologies Ltd. (ALAR) | $135 million |
| Everspin Technologies Inc. (MRAM) | $172 million |
Rekor Systems Inc. (REKR)
Artificial intelligence technology company Rekor Systems has a market cap of about $158 million. The company is using AI and machine learning to help improve infrastructure. Governments use the company’s tech to help create safer highways, and small businesses can also use it to optimize operations and discern visitor patterns.
The stock has had a rough start this year, and it’s down 38% so far in 2024. However, shares are up by more than 48% over the past year and have nearly tripled over the past five years.
Customer demand is picking up, based on Rekor’s third-quarter results. Revenue increased by 35% year over year, and net losses also improved. The company still burns through more money than it makes, and the speculative AI stock has a price-to-sales ratio of about 5. It’s not the best choice for value investors, but those who are able to take on more risk may want to consider this asset.
M-tron Industries Inc. (MPTI)
Founded in 1965 and headquartered in Orlando, Florida, M-tron Industries offers radio and microwave frequency devices and solutions, and it serves blue-chip customers. MPTI stock outperformed the market over several years and has a trailing price-to-earnings ratio of 21 as of March 25.
Shares have nearly doubled since the firm’s 2022 public debut and have nearly tripled over the past year. The stock is unfortunately down more than 20% year to date after a dip on a fourth-quarter earnings and revenue miss on March 26.
Revenue and earnings per share both had big gains in the third quarter of 2023. The company’s top line increased by 29% year over year, while EPS more than tripled from 19 cents to 59 cents per share. Fourth-quarter numbers took a decidedly different turn with EPS dropping down to 3-cents per share, though total revenues jumped nearly 30% over the same quarter a year prior. Backlog orders increased by 3.6% year over year, due in part to an increase in defense product orders.
M-tron Industries has a little more than $4 million in total liabilities compared to $24 million in assets, so it has enough cash to cover its debt. M-tron Industries’ recent profit margin expansion can lead to increased future returns, making the P/E ratio more attractive.
QuickLogic Corp. (QUIK)
QuickLogic is a $230 million corporation that trades at a forward P/E of 27. The stock has performed fairly well year to date, with a 15% gain, and it has almost tripled over the past year.
QuickLogic is a hardware company that is riding the artificial intelligence boom. Full-year fiscal 2023 revenue increased by 31% compared with fiscal 2022. Revenue in the fourth quarter of 2023 increased by 83% on an annual basis.
Net income grew by 266% year over year and resulted in a net profit margin of 27% for the quarter. The company was reporting net losses just two quarters ago, but profit margins have expanded quickly.
New products have been gobbling up an outsized share of the company’s finances, and they’re paying off. They contributed to 91% of the company’s Q4 2023 revenue, while mature products constituted only 9%. Most of the company’s revenue comes from North America.
ReposiTrak Inc. (TRAK)
ReposiTrak recently crept above micro-cap territory but is currently at about a $292 million market cap as of March 26. The stock has a $290 million enterprise value, which indicates that it has more cash than debt.
A 58% year-to-date gain is just the tail end of the company’s larger 12-month increase of 156%.
ReposiTrak is a food traceability and regulatory compliance network. Its software-as-a-service platform solutions for inventory and risk management help retailers, wholesalers and suppliers operate more efficiently. The company has been gaining market share.
Revenue increased by 8% year over year and net income grew by 17% year over year in the second quarter of ReposiTrak’s fiscal 2024.
ReposiTrak is one of the few micro-cap stocks that distributes dividends to its investors. The company recently issued a quarterly dividend of 1.65 cents per share, which comes to 6.6 cents per year.
Autoscope Technologies Corp. (OTC: AATC)
Autoscope Technologies is a nanocap stock with a $35 million market cap and a trailing P/E of 8. The company has several investments in the technology and engineering industries, and Image Sensing Systems is the company’s main subsidiary. The subsidiary specializes in vehicle detection via artificial intelligence.
The stock is up by more than 50% over the past year and offers a large 7.9% dividend yield based on an annual dividend of 52 cents per share. Autoscope Technologies’ criteria for the companies it purchases include sustainable margins, quality management teams, good customer relationships, pretax earnings above $500,000 and successful operation for at least five years.
The company closed out 2023 with a $6.5 million cash balance, which will enable it to make more acquisitions. Its cash balance was $1.2 million at the end of 2022.
Alarum Technologies Ltd. (ALAR)
With a $140 million market cap, Alarum Technologies provides internet access and web data collection solutions. The company’s advanced artificial intelligence products have improved its data collection abilities and attracted speculators, sending its stock up more than 1,250% over the past year.
Revenue increased to a record $7.1 million in the fourth quarter of 2023, which was 37% higher than in Q4 2022. Net income grew by 158% year over year. However, investors should note that the share price is down by 95% over the past five years.
Momentum can help this stock take off in 2024, as the company’s recent switch to profitability is an attractive development for investors. But keep the stock’s five-year returns in perspective when assessing the risk versus the potential reward.
Everspin Technologies Inc. (MRAM)
Everspin Technologies is a semiconductor firm that operates out of Chandler, Arizona. The stock has a trailing P/E of 19 and a $172 million market cap. The stock is up only a cumulative 13% over the past five years but has gained 26% in just the past year.
The company experienced steady growth in the fourth quarter, with revenue increasing 6% year over year while GAAP net income more than tripled to reach $2 million. Everspin reported its 11th consecutive quarter of profitability and does not have any debt. The firm also reached its highest cash balance in the company’s history.
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7 Micro-Cap Stocks That Could Take Off in 2024 originally appeared on usnews.com
