In the fast-paced symphony of the stock market, trends fluctuate like unpredictable tempos and identifying the potential game-changers is akin to finding a hidden melody within a cacophony. These small-cap stocks possess the alchemy to turn a modest investment into an impressive windfall.
These companies emerge not merely as small-cap stocks, but as mavericks navigating the volatile markets. Their tune beckons investors with promises of growth, stability and potential returns.
SurgePays (SURG)
SurgePays (NASDAQ:SURG) reported a net income of $7.1 million and EBITDA of $7.5 million in Q3 2023. Meanwhile, year-to-date net income surpassed $17 million, showcasing consistently profitability growth. Also, the cash balance increased to over $12 million, and the company managed minimal debt. SurgePays experienced a significant turnaround from a net loss of $13.5 million in 2021 to the current profitable quarters.
Fundamentally, SurgePays’ achieving profitability in a short period highlights effective operational restructuring and a solid go-to-market approach. Furthermore, the transition from losses to profits indicates a successful realignment of business strategies and a focus on sustainable growth.
SurgePays aims to expand as a multiproduct company, building a vast distribution network for underbanked products and services. The company strategically phased out legacy businesses like LogicsIQ to streamline operations and enhance market focus. Thus, it emphasizes transitioning Affordable Connectivity Program sign-ups to convenience stores despite a temporary slowdown in subscriber growth.
Additionally, introducing customer-facing point-of-sale equipment will enhance compliance and promote various products on their platform. Also, by introducing the prepaid wireless brand Linkup Mobile, the company aims to capitalize on the significant market potential. The company will deploy 1,000 LCD screens at convenience store counters to promote products and engage customers.
Despite a temporary revenue dip attributed to phasing out LogicsIQ, SurgePays displayed resilience through a simultaneous increase in core business revenue. The impending launch of Linkup Mobile presents a promising avenue for revenue growth, leveraging the existing customer base and infrastructure. Therefore, the strategic use of LCD screens as a marketing tool signifies innovative engagement tactics, potentially driving customer awareness and increasing product uptake, making this an ideal option in small-cap stocks.
ACM Research (ACMR)
ACM Research (NASDAQ:ACMR) experienced a significant revenue increase of 26% in Q3, with its year-to-date revenue growing by 38%. The company achieved a record of $213 million in shipments, a 31% increase from the previous year. ACM Research’s financial performance indicates strong growth momentum, and its revenue and shipment records suggest efficient sales execution and demand for its products.
On the market side, ACM Research benefits from China’s semiconductor capacity expansion plans. It focuses on mature nodes (28 nm, 45 nm) and power devices for the electric vehicle market. The company anticipates being a key player in China’s semiconductor capacity expansion. ACM Research boasts a broad product portfolio covering approximately 90% of all cleaning process steps in memory and logic device applications. It introduces new tools like the Ultra C Vacuum Cleaning Tool for advanced packaging structures and focuses on expanding its product line.
ACM Research consistently introduces new tools and technologies like semi-critical cleaning, high-temperature annealing, low-pressure chemical vapor deposition (LPCVD) furnaces and advanced packaging tools. These innovations address evolving market needs, such as chiplets and advanced packaging structures, aligning with industry trends like AI and GBT applications. In this direction, the company continues to invest in R&D, developing proprietary technologies like the Track and Plasma Enhanced Chemical Vapor Deposition (PECVD) platforms to meet the requirements of next-generation lithography tools.
Overall, ACM Research’s focus on research and development showcases its adaptability to changing industry demands, making it fairly unique among small-cap stocks. It is ensuring a competitive edge in providing solutions for evolving semiconductor technologies. Therefore, developing proprietary technologies positions ACMR favorably to cater to the demands of higher throughput and advanced lithography tools, potentially expanding its market share.
SunCoke Energy (SXC)
SunCoke Energy (NYSE:SXC) demonstrates robustness through long-term contracts with major clients like US Steel (NYSE:X). These contracts showcase stability, extending well into the future, with significant capacity commitments from clients such as Cliffs Steel (NYSE:CLF) at Indiana Harbor (1,220 Kt until September 2035) and Middletown (550 Kt until December 2032). These long-term commitments secure substantial revenue streams, providing a stable foundation for future growth and financial stability.
In Q3 2023, SunCoke Energy reported an adjusted EBITDA of $65.4 million, a decrease of $18.3 million compared to Q3 2022. Also, the domestic coke segment generated $64 million in adjusted EBITDA, reflecting a commendable performance. However, the decrease in EBITDA compared to the prior year primarily stemmed from lower contribution margins on non-contracted blast coke sales, somewhat offset by higher coal-to-coke yields. This highlights a shift towards contracted sales for stable margins.
Furthermore, the logistics business contributed $8.4 million in adjusted EBITDA, handling approximately 5 million tons in Q3 2023, a decline from $12.9 million and 5.7 million tons in Q3 2022. In this segment, lower volumes and pricing, particularly in coal handling, impacted profitability temporarily.
Continued collaboration with US Steel on the GPI project (Granite City) reflects SunCoke’s focus on exploring strategic partnerships to capitalize on growth opportunities. Despite the project’s complexity, the focus on this initiative signifies the potential for substantial rewards to shareholders once consummated.
Finally, the proactive approach to flexibility in blast and foundry coke operations in response to challenging market dynamics reflects the company’s strategic planning and market intelligence.
As of this writing, Yiannis Zourmpanos held a long position in ACMR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
