Undiscovered Gems: 3 Promising Small-Cap Stocks With Strong Potential

In the vast landscape of the stock market, small-cap stocks often go unnoticed, hiding their potential beneath the surface. However, these "undiscovered gems" can offer significant upside for investors willing to dig deeper. Here, we highlight three small-cap stocks with strong growth potential, supported by their strategic maneuvers and financial performances.



1. GeneDx (WGS)
GeneDx, a leader in genomic diagnostics, has demonstrated remarkable growth in its testing services. In Q1 2024, the company conducted 16,592 tests, marking a 91% year-over-year (YOY) increase. This surge in testing points to growing demand for their advanced diagnostic services, which include a comprehensive analysis of genetic data to aid clinicians in making precise medical decisions. Financially, GeneDx has demonstrated robust performance with a significant expansion in adjusted gross margins, reaching 61% in Q1 2024 from 34% a year ago. Moreover, the company reported a 96% YOY growth in revenue from exome and genome tests, totaling $44.0 million for the quarter. These financial gains highlight GeneDx's effective monetization of proprietary genetic data assets and reflect its ability to capture a larger share of the genomic testing market. Such financial discipline positions GeneDx well on its path toward sustainable profitability.



2. Newlake Capital Partners (NLCP)
Newlake Capital Partners, a leader in cannabis real estate, has experienced a solid increase in adjusted funds from operations (AFFO). The AFFO grew by 10.6% YOY to $11.0 million for Q1 2024. The company increased its quarterly dividend to $0.41 per share, equivalent to an annualized rate of $1.64 per share, similar to the increase in Q4 2023. The pattern points to NewLake's focus on returning value to investors. A high and growing dividend yield is attractive to investors, indicating financial stability and confidence in future cash flows from the portfolio. Additionally, NewLake maintains a low leverage profile with only $4 million of debt outstanding against a credit facility that provides over $85 million in available funds until 2027. The facility carries an attractive interest rate, which minimizes financing costs and enhances profitability. This financial structure positions the company favorably to edge strategic investments and capitalize on growth opportunities in the cannabis real estate sector.

3. DoubleDown Interactive (DDI)
DoubleDown Interactive, a pioneer in social casino games, expanded through acquisitions like SuprNation. In Q1 2024, the company reported a total revenue of $88.1 million, marking a 13% increase from the previous year. This growth was driven by a $79.8 million contribution from its core social casino free-to-play games and an additional $8.3 million from SuprNation, the recently acquired iGaming business. This diversified revenue stream demonstrates DoubleDown's ability to expand its market presence through strategic acquisitions. Moreover, profitability metrics also reflect DoubleDown's strong performance. Adjusted EBITDA for Q1 2024 increased by 26% YOY to $31.9 million, with an adjusted EBITDA margin of 36.2%, up from 32.8% in Q1 2023. This improvement points to DoubleDown's sharp cost management strategies and operational efficiency, which has translated into significant net income growth of 28.3% to $30.4 million.



In conclusion, these three small-cap stocks have demonstrated strong growth potential through their strategic maneuvers and financial performances. As the market continues to evolve, investors should keep an eye on these "undiscovered gems" for potential investment opportunities.