Undiscovered Gems: 3 Promising Small-Cap Stocks to Watch

In the ever-evolving landscape of small-cap stocks, three promising companies stand out for their innovative technologies and business models, setting them apart from their competitors. These 'undiscovered gems' offer investors the opportunity to capitalize on emerging trends and growth potential.

1. GeneDx (WGS)
GeneDx, a leader in genomic diagnostics, has seen remarkable growth in its testing services. In Q1 2024, the company conducted 16,592 tests, marking a 91% year-over-year increase. This surge in demand reflects the growing importance of advanced diagnostic services in healthcare. Financially, GeneDx has demonstrated robust performance, with a significant expansion in adjusted gross margins to 61% in Q1 2024 from 34% a year ago. The company's revenue from exome and genome tests grew by 96% year-over-year to $44.0 million in Q1 2024. 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 leading cannabis real estate investment trust (REIT), has shown strong financial performance. The company reported a 10.6% year-over-year increase in adjusted funds from operations (AFFO) to $11.0 million in Q1 2024. NewLake's focus on returning value to investors is evident in its growing dividend yield, which reached $1.64 per share. The company's low leverage profile, with only $4 million of debt outstanding against a credit facility that provides over $85 million in available funds until 2027, enhances profitability and positions NewLake favorably for strategic investments in the cannabis real estate sector.

3. DoubleDown Interactive (DDI)
DoubleDown Interactive, a social casino gaming company, has capitalized on the growing demand for social gaming. 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 3% year-over-year increase in its core social casino free-to-play games and an additional $8.3 million from its recently acquired iGaming business, SuprNation. DoubleDown's sharp acquisitions and operational efficiency have driven its bottom-line improvement, with adjusted EBITDA increasing by 26% year-over-year to $31.9 million in Q1 2024. The company's adjusted EBITDA margin reached 36.2%, up from 32.8% in Q1 2023, reflecting its effective cost management strategies and operational efficiency.

These three small-cap stocks offer investors the chance to invest in innovative technologies and business models with significant growth potential. By understanding the disruptive forces driving their success, investors can benefit from the rapid expansion of their market capitalization. However, it is essential to conduct thorough due diligence and monitor market trends to mitigate risks associated with small-cap investments.