There are many high-quality businesses trading near $10 per share that have significant growth potential ahead as their core operations continue to expand at a rapid pace. While their stock prices remain depressed and languishing, the intrinsic values of these companies are poised for major upside. With smart stock picking, these small-cap gems could deliver outsized multibagger returns for investors willing to take on some risk.
Many of these sub-$10 stocks do come with higher risk profiles. However, by targeting companies that are at or near profitability with established share prices, the upside potential often outweighs the downside risks. These businesses are trading at bargain valuations compared to their growth prospects. Once the market takes notice, significant gains could be in store.
Moreover, with interest rate cuts potentially on the horizon this year, we may see a surge in growth for small-cap companies. Rate cuts could provide just the catalyst needed to ignite a rally in these overlooked gems. Now is the time to take a closer look before they take off.
Urban-Gro, Inc. (UGRO)
Urban-Gro (NASDAQ:UGRO) is an integrated professional services and design-build firm that offers value-added architectural, engineering, and construction management solutions to the Controlled Environment Agriculture (CEA), industrial, healthcare, and other commercial sectors. It also provides complex environmental equipment systems for high-performance indoor cannabis cultivation facilities globally. I believe this company can benefit significantly from the ongoing industrial expansion and infrastructure boom in the United States.
UGRO is expected to see its losses start to narrow substantially, along with revenue growing from $82 million in 2024 to $208 million in 2028 based on current projections. The company currently trades at a forward price-to-sales ratio of just 0.24 times, which I believe is exceptionally cheap. This is mostly due to the fact that Urban-Gro has a $5.3 million debt load, which is quite sizable compared to its $20 million market capitalization. However, I think that once interest rates are cut and the company reaches a positive margin, we could see huge stock price appreciation ahead for UGRO.
FullNet Communications, Inc. (FULO)
FullNet Communications (OTCMKTS:FULO) provides integrated communications services in the United States, including mass notification services, carrier-neutral equipment colocation services, Internet access, web hosting, customized live help desk outsourcing services, and voice and data solutions. The stock is currently off 78% from its peak, but I have strong conviction in FULO at current levels.
In my view, FULO stock is bottoming out and making a turnaround in parallel to improving financials. Despite its tiny $5 million market cap, FULO is a very strong company fundamentally. Not only is it profitable with a 16.5% free cash flow margin (better than 81% of telecom peers), but FULO also pays a dividend that yields 5.7%. It trades at just 11 times earnings, and the company has 22 times more cash than debt on its balance sheet. I believe FULO stock can easily deliver multibagger gains for investors once it makes a full turnaround from here, especially as large telecom companies recover and restart expansion plans.
Olo (OLO)
Olo (NYSE:OLO) is a B2B SaaS company that operates an open platform for restaurants in the United States, enabling on-demand digital commerce operations including digital ordering, delivery, front-of-house management, and payments. The stock doesn’t have the prettiest stock chart recently, and near-term losses are causing the stock to continue declining. However, I believe this company could make a turnaround soon as margins return to positive territory and start expanding again.
In Q4, Olo saw 26.6% year-over-year revenue growth, which beat estimates by 7%. Moreover, analysts expect 20 cents in EPS for 2024, which is then expected to climb to 43 cents in 2026 EPS. That means you’re paying just 11 times 2026 EPS estimates, which looks very cheap to me. Revenue is also expected to climb from $271 million to $400 million during this timeframe. With the global restaurant management software market expected to reach $15.3 billion by 2030, there is substantial long-term growth potential as well. Gurufocus puts OLO’s fair value price at $18 by the end of 2026 for this penny stock.
SelectQuote, Inc. (SLQT)
SelectQuote (NYSE:SLQT) operates a direct-to-consumer platform in the U.S., selling a range of insurance products and healthcare services. It operates through three segments: Senior, Life, and Auto & Home, distributing policies like Medicare Advantage, term life, and homeowners insurance. What differentiates SelectQuote from traditional insurance brokers is its distribution platform, which seamlessly blends technology and agent/human interaction components.
This company does not have the cleanest balance sheet, but I believe it has significant growth potential and looks attractively valued here. In my view, SLQT can deliver multibagger returns from current levels as it trades at a P/S ratio of just 0.25 times. Like many high-growth startups, its stock was decimated from mid-2021 to mid-2022, trading sideways around $1-$2 per share for months. However, I think SelectQuote is poised for a breakout as its financials continue improving.
In Q4, the company’s revenue surged 27% to $405 million, beating analyst estimates by a whopping 7.7%. Yet, the stock remains range-bound, likely due to concerns over its $724 million debt load and mere $22 million in cash. However, SelectQuote is aggressively cutting losses, with declines expected to shrink 43% in 2024 and a further 63% in 2025, before reaching profitability in 2026. Rate cuts could also boost its path to profitability going forward.
U & I Financial Corp (UNIF)
U & I Financial (OTCMKTS:UNIF) is a bank holding company for UniBank, providing banking products and services to small to medium-sized businesses, professionals, and residents, with a focus on Korean and other ethnic minority communities in the U.S. It offers checking, savings, money market accounts, and commercial loans. This stock recently plunged from over $10 to $7 due to near-term issues. However, I see significant appreciation potential over the long run as the balance sheet and growth here look very strong.
UNIF’s cash-to-debt ratio stands at 7.4, and it also has a net margin of over 38%. The P/E ratio is at just 3.5x, which is better than 95% of banks. That’s despite a 3-year revenue growth rate of 16.6% annually, which also outpaces 81% of banks. The 3-year FCF growth rate here is 62%. Gurufocus sees a fair value price of $26.2 by the end of 2027 for UNIF.
S4 Capital plc (SCPPF)
S4 Capital (OTCMKTS:SCPPF) is a digital advertising and marketing services company operating across the Americas, Europe, Middle East, Africa, and Asia Pacific. It offers services including content creation for media platforms, campaign management analytics, creative production, ad serving, and digital transformation.
This stock was down 96% off its 2021 peak at one point, and the chart is definitely ugly on a long-term view. However, it seems to be bottoming out and recovering recently. Management does not expect much growth in 2024 but does expect the decline to slow. A lot of the negatives seem priced in right now, but there is huge potential for margin expansion. SCPPF has a gross margin of 86% but a net margin of -0.6%. Thus, analysts see around 29% annual EPS growth (minus non-recurring items) over the next three to five years. We could see a major re-rating once the headwinds clear and SCPPF returns to growth.
Century Casinos (CNTY)
Century Casinos (NASDAQ:CNTY) focuses on investing in, developing, and operating regional mid-size casinos in North America. It offers entertainment in its casinos, racetracks, hotels, restaurants, bars, showrooms, event venues, comedy clubs, and golf courses. This is another stock I have high conviction in and believe buying on weakness is a good idea.
The stock has declined to a valuation below even its COVID trough. I believe it is likely to bottom out soon. Despite the company delivering solid growth and beating Q4 expectations with EPS 22% higher than expected and 38.6% revenue growth topping estimates by 1%, the stock hasn’t recovered much. CNTY is still unprofitable, but profitability could come soon. Its 3-year EBITDA growth rate is 55.4%. Analysts expect it to turn EPS positive in 2026. The losses until then seem manageable, and CNTY has a $171 million cash buffer to cover those losses. The decline has caused it to trade at just 0.15 times sales, and I don’t expect it to slide down much further from here.
On the date of publication, Omor Ibne Ehsan did not hold (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.