The idea of investing in micro-cap stocks, companies with a low market capitalization, that usually ranges between $50 million and $300 million may seem not logical now as there are a lot of risks associated with them.
These companies are usually traded over the counter and have relatively low trading volume and one can argue that the publicly available information about them is limited. These micro-caps rarely make headlines as they go under the radar of investors. This is on the other hand one of the best investment opportunities assuming that there are reasons that show these companies with very low market capitalization will not go bankrupt soon or that they have some good fundamentals to show.
The three micro-cap stocks to buy in this article are very risky but have the potential to deliver high returns in the long -term as they meet the following criteria. The 1- year % Change in EPS (Basic) is more than 100%, the Return on Equity % is greater than 50%, and the 1 year. % Change in EBITDA is greater than 50%. The stock screener used was Yahoo! Finance screener.
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The large EPS growth, ROE change, and EBITDA growth build a bullish scenario. Below are 3 micro-cap stocks to buy:
Water Oasis Group Limited23.50
Journey Energy (JRNGF)
The first micro-cap stocks to buy is Journey Energy (OTCMARKETS:JRNGF). This is a company that engages in the exploration, development, and production of crude oil and natural gas in the province of Alberta, Canada. Having a previous name Sword Energy, Journey Energy Inc. was founded in 2007 and is based in Calgary, Canada.
The stock trades at a PE Ratio (TTM) of 3.45 and is highly volatile with a Beta (5Y Monthly) of 3.88. A high Beta can create wild price swings, and high profits if investors catch the right timing.
Investors seem to like the story behind the business of Journey Energy as its shares have gains of nearly 134% year-to-date. In 2021 the sales growth was 80.01% to $115.2 million, and the firm turned profitable, with a net income of $99.13 million, and a growth of 275.07%.
The EBITDA growth in 2021 was 326.35% and free cash flow growth was 645.09% to $36.42 million. It is best to wait for a dip and a correction after a strong rally year-to-date for Journey Energy shares.
Leatt Corporation (LEAT)
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Leatt Corporation (OTCMARKETS:LEAT) is a designer, developer, and distributor of personal protective equipment for participants in motorsports and leisure activities worldwide. Its former name was Treadzone. The company was founded in 2001 and has its headquarters in Durbanville, South Africa.
Shares of Leatt Corporation have losses of approximately 28% year-to-date. The Q1 2022 results were very strong.
Some of the highlights for this quarter include “Strongest revenue performance to date”, “Record-breaking revenue for seven quarters in a row,” and “Net Income up 105%, and strong brand development.”
Global revenues of $24.2 million, increased 88%, compared to Q1 2021, and net income of $4.2 million, grew 105%, compared to Q1 2021. These are great financial results. Additionally EPS (basic) increased 92% year-over-year and income from operations was up 104% compared to the first quarter a year ago.
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The company has had solid sales growth in the past four consecutive years and increased in the year 2021 its EBITDA by 165.33%. I see plenty of good reasons to monitor this micro-cap stock.
Water Oasis Group Limited (WOSSF)
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Water Oasis Group Limited (OTCMARKETS:WOSSF) is a company providing beauty and related wellness services, operating through Product and Service segments. Water Oasis Group Limited was incorporated in 1998 and is headquartered in Causeway Bay, Hong Kong.
Two features make this micro-cap stock interesting is that the stock trades at a PE Ratio (TTM) of 6.23, which is a low value. The second feature is that it offers a forward dividend and yield of $0.03 and 17.36% respectively. The losses of nearly 10% year-to-date are not excessive and the income statement shows some great trends. The sales growth in 2021 was 56.19% to $829.94 million and the company is profitable for the past five consecutive years.
In 2021 the net income growth was 514.15% to $170.34 million and EBITDA growth was 130.42% to $361.44 million. The firm is also generating positive but volatile free cash flow for the past five years as well. It is a micro-cap that deserves more due diligence as the fundamentals look pretty good.
On the date of publication, Stavros Georgiadis, CFA did not have (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.
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