Micro-cap stocks command a market valuation in the range of $50 million to $300 million. There are two points to note related to micro-cap stocks.
First, since the market valuation is low, these stocks generally represent early-stage companies. Therefore, the risk is significantly high when considering exposure to micro-cap stocks.
Further, with high-risk, investors are also looking for high-returns. A low market valuation implies multibagger returns at the blink of an eye if the business gains traction.
A conclusion from these points is that micro-cap stocks can be considered for supernormal profits. However, investors need to resist the temptation of going overweight on these stocks.
The focus of this column is on three micro-cap stocks that represent companies with an attractive business. Further, the addressable market for this business is significant and provides ample headroom for growth. Let’s discuss the catalysts that are likely to ensure massive value creation.
Solid Power (SLDP)
After a big correction, Solid Power (NASDAQ:SLDP) stock has been sideways in the last five months. I believe that a strong rally is due after some consolidation. The Company is working towards the commercialization of solid-state batteries. If the battery gets automotive validation in the next 24 months, SLDP stock is likely to go ballistic.
The good news is that there is steady progress in the right direction. This progress is backed by parallel research and development efforts by BMW (OTCMKTS:BMWYY) and SK On. The Company also has Ford (NYSE:F) as one of the automotive partners.
Last year was important for Solid Power with the delivery of A-1 sample cells in October 2023 for automotive validation. This year is equally important with the focus on advancing cell design to A-2 sample specification.
Another important point to note is that Solid Power ended 2023 with a liquidity buffer of $415 million. For the current year, the cash investment is expected to be in the range of $100 to $120 million. Therefore, there are no dilution concerns in the next 12 to 24 months.
Yatra Online (YTRA)
Yatra Online (NASDAQ:YTRA) is another undervalued micro-cap stock to buy for multibagger returns. In the last 12 months, YTRA stock has remained sideways. This is a good time to accumulate this hidden-gem.
As an overview, Yatra Online is an online travel booking Company in India. It’s expected that the online travel market in India will expand to $31 billion by 2025. Further, with favourable demographics and healthy GDP growth, the market size will continue to swell. This presents a big opportunity for growth in the coming years and Yatra is positioned to capitalize on the opportunity.
A key differentiating factor for Yatra in the Indian market is focus on business travel. The Company has 800 large corporate customers with an addressable employee base of seven million. It’s also worth noting that the Indian consumer travel market is growing at twice the rate of GDP growth. With higher internet penetration and swelling disposable income, the market is likely to remain attractive.
Therefore, with multiple growth catalysts, I am bullish on Yatra. As revenue growth accelerates coupled with margin expansion, YTRA stock is poised to surge higher.
Balde Air Mobility (BLDE)
Blade Air Mobility (NASDAQ:BLDE) is a provider of air transportation alternatives to congested ground routes in the United States. The Company has a unique and asset-light business model. The current market valuation of $205 million looks attractive and BLDE stock is a potential multibagger.
For 2023, Blade reported healthy revenue growth of 54.1% on a year-on-year basis to $225.1 million. For the same period, the Company reported adjusted EBITDA loss of $16.6 million. The good news is that the Company has guided for positive adjusted EBITDA in 2024 and “adjusted EBITDA in the double-digit millions for 2025.” With healthy growth, I expect margin expansion to continue beyond this period.
The Company’s business is divided into two key segments. The medical segment reported stellar revenue growth of 76% on a year-on-year basis to $127 million. The Company is a provider of transportation services for transplant centers and organ procurement organizations. The passenger segment growth was also healthy at 33% on a year-on-year basis to $99 million. Overall, robust revenue growth coupled with margin expansion makes BLDE stock attractive. Further, as asset-light model is likely to ensure robust cash flows in the coming years.
On the date of publication, Faisal Humayun 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.
