Playing in the field of nano-cap stocks is similar to the concept of stealing bases. In a tight baseball game, every advantage counts. Therefore, you might get the signal from the manager to steal a bag. You could end up being the hero or end up looking like a fool.
It’s a binary proposition: high risk, high reward. And while advantages help break up a tight game, you also don’t want to give up cheap outs. That could put you in a serious disadvantage. And that’s why people seldom invest heavily in nano-cap stocks or companies that feature a market capitalization of $50 million or less. It’s just too risky.
Nevertheless, in certain situations – maybe the runner is fast and the opposing catcher is slow to react – an attempt to steal might make sense. With nano-cap stocks, you might want to consider only compelling enterprises with analyst backing.
Yeah, even in this speculative subsegment, Wall Street experts might give a tip of the hat. If you want to gamble, here are the nano-cap stocks to consider.
Passage Bio (PASG)
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What it is: A biotechnology company, Passage Bio (NASDAQ:PASG) focuses on therapeutics for neurodegenerative diseases. Currently, the company carries a market cap of $54.18 million, which admittedly is a bit above the threshold for nano-cap stocks.
Relevance: Still, if you’ll grant me a mulligan – and there will be another one coming up – Passage Bio deserves to be on your radar. Fundamentally, it plies its trade in an ultra-relevant sector. By year’s end, the neurodegenerative disease therapeutics market size will reach a valuation of $51.45 billion. Further, the sector may expand at a compound annual growth rate (CAGR) of 7.14%, leading to a value of $72.63 billion.
Pros: Analysts rate shares a moderate buy with a $7 price target. That implies almost 610% upside potential. Also, it’s been on the run, gaining 59% in the trailing one-month period.
Cons: Since its public market debut in 2020, PASG lost almost 96% of equity value. Thus, you want to be extremely careful here.
AudioEye (AEYE)
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What it is: Leveraging artificial intelligence, AudioEye (NASDAQ:AEYE) primarily serves in the digital accessibility platform industry. Presently, the company carries a market cap of $50.29 million. Again, that’s just a bit over the threshold for nano-cap stocks.
Relevance: If you’ll overlook the technicality for a second time, AudioEye entices speculators because of its underlying relevance. We all know how much AI and machine learning has blossomed in 2023. However, the digital accessibility software market is starting to grow. Right now, the sector features a valuation of $706.15 million. However, over the next five years, the sector could reach $958.7 million.
Pros: In terms of the industry’s CAGR, we’re only talking about 6.31%, which isn’t that impressive. However, consider two factors. Number one, the sector is a novel one which may have a high ceiling. Number two, AudioEye being a nano-cap also offers a high upside ceiling. In analysts’ terms, we’re talking $8 (about 89% upside).
Cons: AudioEye’s earlier impressive revenue growth has decelerated significantly.
FlexShopper (FPAY)
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What it is: A lease-to-own or rent-to-own e-commerce specialist, FlexShopper (NASDAQ:FPAY) enables consumers to acquire their desired goods and pay for them over time. At the moment, it features a market cap of less than $39 million.
Relevance: Fundamentally, the tough economic backdrop of the consumer economy could cynically boost the underlying sector. Also, recent holiday sales indicate that buy now, pay later (BNPL) platforms have boomed in popularity, which could help FPAY. Further, in 2021, the U.S. rent-to-own market reached a valuation of $10.48 billion. By 2027, this segment could hit $15.53 billion.
Pros: Basically, the gameplan here is for FlexShopper to gain a small but tangible foothold in the underlying sector. If it does, given the small size of the company, FPAY may blossom as one of the top nano-cap stocks to buy. Also, analysts rate shares a unanimous strong buy with a $2.75 average price target.
Cons: Per investment data aggregator Gurufocus, FPAY suffers from five red flags.
One Stop Systems (OSS)
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What it is: An edge computing specialist, One Stop Systems (NASDAQ:OSS) designs and manufactures innovative modules and systems for AI transportable applications. Its relevance touches many industries, including defense, mining and autonomous vehicles.
Relevance: While OSS ranks among the ultra-high-risk enterprises among nano-cap stocks, it’s also compelling because of the myriad directions the underlying company can go. According to Grand View Research, the global edge computing market reached a valuation of $11.24 billion last year. By 2030, sector revenue could hit $155.9 billion. If so, that would come out to a CAGR of 37.9% from 2023.
Pros: Not only can One Stop branch out into many arenas, it also benefits from serving multiple industries. Therefore, if one sector’s clients fall out, others may be able to step in. Also, analysts peg OSS a moderate buy with a $2.58 price target, implying over 34% upside potential.
Cons: One Stop is also financially vulnerable, incurring four red flags.
Jerash Holdings (JRSH)
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What it is: An apparel contract manufacturing firm, Jerash Holdings (NASDAQ:JRSH) is not a household name. Rather, the company makes apparel for global brands, making it an intriguing idea among nano-cap stocks. Right now, it features a market cap of $37.93 million.
Relevance: Obviously, apparel isn’t the most groundbreaking business concept out there. At the same time, it’s relevant and predictable, adding credibility to JRSH. In 2020, the underlying industry reached a value of nearly $527.1 billion (worldwide). By 2025, the sector could hit $842.7 billion and by 2030, nearly $1.14 trillion.
Pros: For being one of the nano-cap stocks, Jerash represents a hidden gem for its financial resilience. It features a cash-to-debt ratio of 35.88x, blowing past most competitors. It also features a very respectable three-year revenue growth rate of 10.2%. Nevertheless, it trades at only 0.29x trailing-year sales. Lastly, analysts rate shares a moderate buy with a $5 price target.
Cons: While JRSH has started to pick up, the stock lost about 22% of equity value since the January opener.
NanoString Technologies (NSTG)
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What it is: A life sciences and biotech company, NanoString Technologies (NASDAQ:NSTG) offers discovery and translation research solutions. In particular, it specializes in spatial genomics profiling. Presently, the company carries a market cap of $38.28 million.
Relevance: While a highly specialized and thus niche player in the broader biotech space, NanoString ranks among the more intriguing nano-cap stocks for extreme speculators. That’s because of its burgeoning core market. By 2027, the spatial genomics and transcriptomics sector could hit a valuation of $800 million. That would come out to a CAGR of 17.6% from 2022’s valuation of $355 million.
Pros: Arguably, NanoString may enjoy substantial upside if it can secure a foothold in the spatial genomics market. Analysts are betting on exactly that, with NSTG carrying a consensus view of moderate buy. Also, the average price target stands at $2.83, implying almost 255% growth potential.
Cons: Unfortunately, NanoString suffers from seven red flags. Again, only extreme speculators should be looking at NSTG.
Intellicheck (IDN)
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What it is: An identity management enterprise, Intellicheck (NASDAQ:IDN) may rise in pertinence based on expanded threat profiles. Currently, the company carries a market cap of $37.35 million. On a year-to-date basis, IDN dipped about 8%.
Relevance: According to Grand View Research, the global identity verification market size reached a valuation of $9.87 billion in 2022. Experts project that from this year to 2030, the sector will expand at a CAGR of 16.7%. If so, the industry might print revenue of $33.93 billion. That’s simply a massive total addressable market for such a diminutive firm, making IDN a tempting example of nano-cap stocks.
Pros: Surprisingly, Intellicheck enjoys some impressive financial stats. First, it carries zero debt. Second, it prints a three-year revenue growth rate of 20.4%. Finally, analysts rate IDN a moderate buy with a $5 target, projecting 159% upside potential.
Cons: Over the past five years, IDN has gone nowhere, thus presenting huge risks for speculators.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
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.
