3 Small-Cap Stocks That Could Trounce the S&P 500 Over the Next 5 Years

Core Insights - Small-cap companies present significant growth opportunities, often overlooked in favor of larger firms, but they come with higher volatility [1][11] - These companies typically operate in emerging markets, allowing for rapid market share expansion and potential stock price appreciation [2] Company Summaries The Honest Company - Focuses on clean and sustainable personal care products, reporting a 10% revenue growth to $93 million in Q2 2024, with gross margins increasing from 27.1% to 38.3% year over year [3][4] - Achieved three consecutive quarters of positive adjusted EBITDA, prompting management to raise full-year revenue and profitability guidance [4] - Stock price has risen over 222% in the past 12 months, with a current market cap of approximately $378 million, indicating a conservative valuation in the multi-billion-dollar clean consumer products market [5] Poet Technologies - Develops photonic solutions for data communications and AI applications, with stock rising 314% this year due to strategic partnerships and design wins [5][6] - Recently announced collaboration with Mitsubishi Electric for 3.2T optical engines and secured design wins with Foxconn Interconnect Technology and Luxshare Tech [6] - Currently in early commercialization stages with limited revenue and facing intense competition in the optical components market [7] Applied Digital - Builds and operates next-generation digital infrastructure focused on high-performance computing and AI applications, reporting Q1 fiscal 2025 revenues of $60.7 million, a 67% increase from the previous year [8][9] - Validated strategy through a $160 million private placement, including investment from Nvidia, while expanding cloud services and developing a 100-megawatt data center for AI [9] - Faces execution risks and requires significant capital investment to scale operations amid intensifying competition in the high-performance computing sector [10]