In the realm of investing, finding cheap growth stocks, especially in the small cap sector, can be a game-changer for your portfolio. These stocks often offer significant potential for growth at a fraction of the cost of their larger counterparts. In this article, we'll delve into the world of US small cap growth stocks and highlight some of the best picks that investors should consider.
Understanding Small Cap Stocks
Small cap stocks are shares of companies with a market capitalization of less than $2 billion. These companies are often in the early stages of growth and have the potential to experience rapid expansion. While they come with higher risk, they also offer the potential for substantial returns.
What Makes a Stock 'Cheap' and 'Growth-Oriented'
A 'cheap' stock is typically one that is trading at a lower price relative to its intrinsic value. This can be determined by various metrics, such as the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio. A 'growth-oriented' stock, on the other hand, is one that is expected to grow at a faster rate than the market or its industry.
Top US Small Cap Growth Stocks to Watch
Tesla, Inc. (TSLA)
- Intrinsic Value: $1,200
- Market Price: $1,000
- Growth Rate: 50% Tesla, the electric vehicle (EV) manufacturer, has been a leader in the small cap growth sector. Despite its high market capitalization, Tesla's growth prospects remain strong, making it a compelling investment.
Shopify Inc. (SHOP)
- Intrinsic Value: $1,500
- Market Price: $1,200
- Growth Rate: 40% Shopify is a cloud-based, multi-channel commerce platform that enables merchants to sell online. With the rise of e-commerce, Shopify's growth prospects are promising.
Square, Inc. (SQ)
- Intrinsic Value: $1,000
- Market Price: $800
- Growth Rate: 35% Square provides financial services and mobile payment solutions. The company's growth has been impressive, and it continues to expand its offerings.
Palantir Technologies Inc. (PLTR)
- Intrinsic Value: $1,500
- Market Price: $1,200
- Growth Rate: 45% Palantir is a software company that provides data analytics solutions. The company has seen significant growth, particularly in the defense and government sectors.
Zoom Video Communications, Inc. (ZM)
- Intrinsic Value: $1,200
- Market Price: $1,000
- Growth Rate: 50% Zoom is a video conferencing platform that has gained immense popularity, especially during the COVID-19 pandemic. Its growth prospects remain strong as remote work becomes more prevalent.
Conclusion
Investing in cheap growth stocks, particularly in the US small cap sector, can be a lucrative strategy. By identifying companies with strong growth potential and a lower market price, investors can capitalize on significant returns. However, it's crucial to conduct thorough research and consider the risks associated with small cap stocks before making any investment decisions.
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