While they may not have the brand recognition of large-cap stocks, small-cap companies often offer more room for expansion and market penetration. In particular, their ability to grow faster, given their smaller starting point, sets small-cap stocks apart.

Therefore, investors could consider looking into small-cap stocks, FARO Technologies, Inc. (FARO), PlayAGS, Inc. (AGS), and ChromaDex Corporation (CDXC), with 10x potential.

The annual inflation rate in the United States rose for a second consecutive month to 2.7% in November 2024 from 2.6% in October, in line with expectations. The rise is partly influenced by low base effects from last year. Small-cap companies often perform well during periods of economic recovery, as they tend to be more sensitive to market conditions.

Additionally, the Fed lowered the federal funds rate, the interest rate banks charge for short-term loans, to a range of 4.25% to 4.5%. The decision comes after policymakers slashed rates by 0.5% points in September, followed by a 0.25% point drop in November. Lower interest rates can benefit small-cap stocks by improving borrowing conditions, increasing investor risk appetite, and offering the potential for outperformance. 

Considering these conducive trends, let’s examine small-cap growth stocks in detail:

FARO Technologies, Inc. (FARO)

With a market capitalization of $492.606 million, FARO designs, develops, manufactures, markets, and supports software-driven three-dimensional measurement, imaging, and realization solutions worldwide.

On October 15, 2024, FARO launched the Focus Premium Max 3D Laser Scanner, extending the scanning range to 400 meters and reducing scanning time by up to 50% with Hybrid Reality Capture. The enhanced Focus portfolio simplifies workflows for applications in construction, geospatial, and public safety.

In terms of forward EV/Sales, FARO is trading at 1.42x, which is 56.2% lower than the industry average of 3.23x. Also, its forward EV/EBITDA multiple of 18.84 is marginally lower than the industry average of 18.91.

FARO’s net sales for the fiscal third quarter that ended September 30, 2024, amounted to $82.56 million. The company’s non-GAAP gross profit grew 9.3% year-over-year to $46.36 million. Moreover, its non-GAAP net income stood at $4 million, or $0.21 per share, up 774.2% and 600%, respectively, from the year-ago values.

Analysts expect FARO’s EPS for the quarter ending December 31, 2024, to increase 11.1% year-over-year to 0.40. Its revenue for the quarter ending June 30, 2025, is expected to grow 6.3% year-over-year to $87.28 million. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 49.6% to close the last trading session at $26.04.

Shares of FARO have surged 42.5% over the past three months to close the last trading session at $26.04.

FARO’s POWR Ratings reflect its outlook. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.  

FARO also has an A grade for Growth and a B for Momentum, Value, Sentiment, and Quality. It is ranked #3 out of 41 stocks in the B-rated Software – Business industry.

To see additional POWR Ratings for Stability, click here.

PlayAGS, Inc. (AGS)

AGS designs and supplies gaming products and services for the gaming industry in the United States and internationally. It operates through three segments: Electronic Gaming Machines (EGM), Table Products, and Interactive Games (Interactive).

In terms of forward EV/EBIT, AGS is trading at 13.69x, which is 12.1% lower than the industry average of 15.58x. Also, its forward EV/EBITDA multiple of 5.58 is 46.6% lower than the industry average of 10.44.

In the third quarter that ended on September 30, 2024, AGS’ total revenues increased 11% year-over-year to $99.17 million. Its income from operations stood at $17.46 million. The company’s net income came in at $2.43 million compared to a net loss of $156 thousand.

Analysts expect AGS’ revenue and EPS for the fiscal fourth quarter (ended December 2024) to increase 6.7% and significantly year-over-year to $100.48 million and $0.17, respectively. Also, the company has topped the consensus revenue estimate in each of the four trailing quarters, which is remarkable.

The stock gained 31.3% over the past nine months to close the last trading session at $11.54.

AGS’ POWR Ratings reflect robust prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. AGS has an A grade for Growth and a B for Value, Sentiment, and Quality. It is ranked #2 out of 27 stocks in the Entertainment – Casinos/Gambling industry. 

Beyond what is stated above, we’ve also rated AGS for Sentiment and Quality. Get all the stock’s ratings here.

ChromaDex Corporation (CDXC)

CDXC operates as a bioscience company focusing on developing healthy aging products. The company operates through three segments: Consumer products; Ingredients; and Analytical Reference Standards and Services. 

For the third quarter ended September 30, 2024, CDXC’s net sales increased 5.5% year-over-year to $25.58 million. Its operating income came in at $1.60 million compared to an operating loss of $1.15 million. The company’s net income was reported at $1.88 million and $0.02, compared to net loss and loss per share of $959 thousand and $0.01, respectively.

Analysts expect CDXC’s revenue for the fiscal fourth quarter (ended December 2024) to increase 25.1% year-over-year to $26.51 million. Also, the company has topped the consensus EPS estimate in each of the four trailing quarters, which is remarkable.

Over the past six months, CDXC’s stock has gained 112.4% to close the last trading session at $5.48.

CDXC’s POWR Ratings reflect its bright outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

CDXC has an A grade for Growth, Sentiment, and Quality. It is ranked #8 out of 81 stocks in the Chemicals industry.

For additional CDXC’s Stability, Momentum, and Value, click here.  

What To Do Next?

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FARO shares were trading at $26.65 per share on Friday afternoon, up $0.61 (+2.34%). Year-to-date, FARO has gained 5.09%, versus a 1.02% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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