Small-cap stocks are usually considered to be stocks with market capitalizations somewhere between $250 million and $2.5 billion.
Most companies start out as small-caps, but by continually growing their earnings and cash flow, their share prices appreciate. This can increase the market capitalization (share price times shares outstanding) of the company to large, or even mega-sized, while investors along for the ride reap the value appreciation.
Big names like Microsoft, Apple, and Amazon were all small-caps at one point.
Not all small-caps companies flourish like those giants have. Many fail or stop growing, which means losses or little profit for investors.
Great companies reveal themselves over the long term by continually producing quality earnings and sales growth.
According to Forbes, here are a few small-cap companies to research further are:
- ACM Research produces cleaning equipment for the semiconductor industry. The company’s products remove impurities and particles from microchips. The company also offers other equipment that is used in various semiconductor processes.
- Digi International is a technology company focusing on wireless communication and devices. It has more than 160 patents on products and 15 global offices.
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