As the financial market evolves, investors seek potency in small-cap stocks. In this dynamic market, three companies emerge as undiscovered opportunities poised for growth.
To begin the first one, it strategically leverages the vast oil reserves of the Chaveroo Field, indicating immense untapped potential and a foundation for extraction. The second one’s optimistic outlook for 2024, driven by increased unit sales, margin optimization and enhanced subscription offerings, promises profitability improvements. The third one, with ambitious expansion plans and a diverse market presence, demonstrates its commitment to long-term growth and financial resilience.
Read this article to uncover the potential of these small-cap stocks and explore their strategic approaches, financial strengths and growth trajectories.
Evolution Petroleum (EPM)
The Chaveroo oilfield represents a considerable growth opportunity for Evolution Petroleum (NYSEAMERICAN:EPM). The field has immense untapped potential, with an estimated reserve of 700 million barrels of oil. Only 5% of the oil has been recovered, indicating a solid reserve base for future extraction. Fundamentally, this vast resource sets the stage for extensive production and revenue generation.
Additionally, a participation agreement exists to horizontally develop over 80 gross and 40 net locations within the Permian Basin and New Mexico. That allows Evolution to maximize the field’s potential. Fundamentally, horizontal drilling provides a more extensive reach, optimizing production efficiency and enhancing recovery rates.
Furthermore, Evolution Petroleum’s strategic approach to the Chaveroo deal minimizes initial investment risks. By paying upfront acreage costs for future drilling within the development block, the company ensures prudent allocation of funds towards productive endeavors, optimizing shareholder value. Also, the company’s position suggests its ability to sustain operations, fund development projects and maintain dividend payments. In terms of numbers, the company ended Q1 fiscal 2024 with approximately $60 million in liquidity — cash on hand and borrowing capacity.
On the other hand, despite challenges in specific properties like Barnett Shale, Evolution Petroleum maintained overall production stability and achieved a net 0% decline from Q4 2023. That indicates the company’s ability to overcome hurdles by leveraging operational improvements in other assets.
Finally, Evolution Petroleum has a track record of consistent dividend payments. The 40th and 41st consecutive quarterly dividends suggest the company’s dedication to delivering returns. Overall, the company’s acquisition strategy focuses on obtaining accretive-producing properties. Hence, this aligns with the company’s goal of sustaining dividends while expanding its asset base.
GoPro (GPRO)
GoPro’s (NASDAQ:GPRO) outlook for 2024 anticipates a substantial increase in units sold, projecting a range of 3.3 million to 3.5 million, representing over 10% growth compared to 2023. Correspondingly, revenue projections between $1.1 billion and $1.2 billion forecast a top-line growth trajectory.
Furthermore, the objective to increase gross margins from 32% in 2023 to 37% in 2024 reflects its strategic initiatives. Those include introducing lower-cost entry-level products, price protection measures, cost-saving strategies and enhancements in subscription offerings. Hence, this represents the company’s focus on profitability through margin optimization.
At the bottom line, the company aims for profitability improvements in 2024. That means projecting non-GAAP net income from $30 million to $50 million, a solid leap from 2023. The improvement demonstrates operational efficiency and solid cost management.
Fundamentally, there is an improvement in retention rates over time, with year one at 60% to 65% and year two at 70% to 75%, highlighting GoPro’s ability to retain its customer base. The increased loyalty indicates customer satisfaction with the products and services offered.
Additionally, the company has tried to enhance its subscription offering to increase the attach rate, which currently stands at 40%. By providing more value and incentives through subscriptions, GoPro aims to elevate this attachment rate, increasing recurring revenue.
Finally, the launch of a desktop version of the Quik app for Mac OS is attached, along with plans for a Windows version in Q2 2024. That suggests GoPro’s dedication to enhancing the user experience by offering advanced features through subscription tiers. Therefore, these developments may continue to support the potential upward momentum in market valuations.
Sanmina (SANM)
Sanmina (NASDAQ:SANM) has allocated over $400 million in capital expenditures in the past two years. That shows a focus on expanding capabilities, enhancing infrastructure and positioning itself for anticipated growth.
For instance, the company is internally targeting revenue growth between $10 billion and $12 billion over the next three years, highlighting Sanmina’s ambitious expansion plans. In the same context, Sanmina has year-over-year revenue growth of 13% in fiscal 2023. Specifically, that is a vital indicator of the company’s ability to expand its top line.
SANM’s debt reduction prioritization aligns with a conservative financial approach. Fundamentally, reducing financial risks may strengthen Sanmina’s financial standing. Also, lower debt levels enhance credit ratings, reduce interest expenses and provide flexibility in pursuing growth opportunities without excessive leverage.
Moreover, Sanmina has a presence across multiple markets, including industrial, medical, defense, aerospace, automotive, communication networks and cloud infrastructure. Fundamentally, this top-line diversification minimizes dependency on a single sector, spreads risk and capitalizes on different industry demand trends. Also, the company’s long-term customer relationships average 10 to 15 years, which supports business growth.
Finally, at the bottom line, there is a non-GAAP diluted year-over-year EPS growth of 34% in fiscal 2023. That suggests Sanmina’s capability to transmit revenue growth into increased profitability per share. On the other hand, the company has a share repurchase program of 1.58 million shares for $84 million in fiscal 2023, along with a remaining authorization of $279 million. Therefore, that suggests a rapid pace of returning value to shareholders.
As of this writing, Yiannis Zourmpanos held a long position in GPRO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.