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Companies positioned for multi-fold growth in revenue, EBITDA, and cash flows in the next few years
Small-cap growth stocks give investors an opportunity for exposure to some of the best stories at an early stage. Without a doubt, there is hesitation in taking a big plunge as the risk is high. However, even a small allocation of 10% to small-cap stocks can do wonders. The reason is the potential for 10x, 20x or 50x returns as the story matures. The focus of this column is on three small-cap stocks that have millionaire-maker potential.
After more than a decade of investing, I can say that identifying a good story is 10% of the work done. The real challenge is to hold through the thick and thin. The investment horizon and the patience to hold are the key differentiating factors in wealth creation.
However, we are talking about early-stage businesses. It therefore makes sense to quarterly review of developments. A growing idea needs to be monitored closely as compared to a blue chip. With this overview, let’s talk about the reasons to be bullish on these growth stocks.
EHang Holdings (EH)
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The flying car industry is at an early growth stage. The first movers with good execution are likely to be massive value creators. EHang Holdings (NASDAQ:EH) is among the quality names to consider for multi-fold returns.
As an overview, EHang has already commercialized eVTOL in China. Recently, EHang announced a collaboration with Southern Airlines General Aviation Company. The objective is to “jointly cultivate innovative solutions for low-altitude economy.”
It’s worth noting that the order flow for EH216-S eVTOL has been accelerating. This is after the company secured clearance for mass production of EH216 from the Civil Aviation Administration of China. The order inflow is likely to translate into healthy growth in the next few years.
Additionally, EHang is going aggressive in terms of international expansion. As of Q1 2024, the company had international partnerships and conducted demo flights in UAE, Spain, Costa Rica, and Japan. I am therefore bullish on stellar growth and the subdued EH stock is likely to skyrocket among small-cap growth stocks.
Lithium Americas (LAC)
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The sustained correction in lithium prices has translated into massive wealth destruction in some of the best lithium stocks. However, if there was a good time to buy lithium stock ideas, it’s now. Lithium Americans (NYSE:LAC) has tremendous asset potential and has secured financing for asset construction. Once sentiments reverse for lithium, multi-bagger returns are likely in the blink of an eye.
To put things into perspective, the Thacker Pass asset has an after-tax net present value of $5.7 billion. In comparison, Lithium Americas has a current market valuation of $572 million. I must add that once both phases of the asset commence production, the average annual EBITDA potential is $2 billion. Clearly, the asset is a cash flow machine and LAC stock is deeply undervalued.
Earlier in March, Lithium Americas received a conditional commitment for a $2.26 billion loan from the U.S. Department of Energy. The lithium miner has also received a liquidity infusion of $650 million in two tranches from General Motors (NYSE:GM). The financing underscores the potential the asset holds as one of the small-cap growth stocks on the market right now.
Bitfarms (BITF)
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Bitcoin (BTC-USD) has witnessed some correction in the recent past. However, the bull market is far from over. Chart expert Peter Brandt believes that the cryptocurrency is likely to touch $200,000 by the end of the current bull market in 2025. If this scenario holds true, Bitfarms (NASDAQ:BITF) can deliver 10x returns from current levels.
One reason to like the Bitcoin miner is strong fundamentals. As of Q1 2024, the company had a zero-debt balance sheet. Further, a liquidity buffer of $124 million provides flexibility for aggressive investments.
It’s worth noting that as of Q1, Bitfarms reported a hash rate capacity of 10.4EH/s. The company has guided for year-end capacity of 21EH/s. Further, mining capacity is expected to increase to 35EH/s by the end of 2025.
As a low-cost miner, Bitfarms is positioned to report multi-fold growth in revenue and EBITDA in the next 18 months. It’s therefore realistic to expect 5x to 10x returns in a quick time.
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.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
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