By - Hina Chowdhary
Summary
- Small-cap stocks have been outperforming in recent times as compared to the mid and large cap stocks.
- Such stocks are small in terms of market capitalisation but have huge growth potential.
Several research and studies carried out over the time have indicated that the small cap company shares have outperformed the larger ones. However, a greater level of uncertainty is also involved in these businesses in comparison with the already established, financially stable companies. Hence, the prices of small-cap stocks can be more volatile and riskier than the large-cap and mid-cap stocks.
If we go by the terminology, small cap is a term that stands for a group of stocks and shares having a smaller market capitalisation of more than £300 million, but less than £2 billion. Such stocks include young and potentially fast-growing companies because of their size and are known for generating large returns over time. The small cap stocks attract the investors more because the earnings of such companies grow faster and in a more sustainable way.
Here we will be discussing some of the small cap stocks which have good overall growth prospect and can be kept on the radar for this year.
Synairgen PLC (LON: SNG)
Synairgen is a UK-based pharmaceutical company, which is involved in the discovery of drug and development company for respiratory diseases. The game changing drug of company, SNG001 is being developed for the treatment of Covid-19 and is undergoing Phase III trials, which has displayed positive results so far. The Investigational New Drug (IND) application to evaluate the drug has been approved by the Food and Drug Agency (FDA) and has also secured a fast-track status.
Synairgen was successful in raising approximately £80 million in the placing of 45,714,285 shares at the issue price of 175 pence per share in October 2020 in order to strengthen its balance sheet. The healthcare company remains fully focused on its strategy of progressing inhaled IFN-beta and on expediting the next steps with SNG001.
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Avacta Group PLC (LON: AVCT)
The UK-based biotech company was busy last year in developing Affimer-based diagnostic assays, including the AffiDXTM SARS-CoV-2 Lateral Flow Rapid Antigen Test and a BAMSTM SARS-CoV-2 Assay, in association with Adeptrix Inc. The company’s involvement in preventing the spread of the coronavirus disease has helped in attracting the investors, resulting in the share price to surge from GBX 24.00 (April 2020) to GBX 197.00 (February 2021) over the last ten months.
Greatland Gold PLC (LON: GGP)
The economic disruption induced by the Covid-19 crisis has shifted the investors’ attention towards the precious metal-gold, which is considered as the ‘safe haven’ asset. The shares of Greatland Gold have experienced an exceptional year, and the stock remains well-positioned for 2021.
The shares in gold miner boast an upbeat outlook after witnessing a series of drilling successes at its Havieron project. The latest drill results announced by the company confirms the higher-grade mineralisation within the areas of South East Crescent and Breccia. In the coming six months, the company tends to focus on the 2021 growth drilling programme, which includes plans of drilling approximately 65,000 metres in the next six months.
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ITM Power PLC (LON: ITM)
The falling demand for fossil fuels such as oil and gas during the pandemic has shifted the consumers’ attention towards renewable energy sources, resulting in the share price of the energy storage and renewables company to grow by five times in the last one year. The financial position of the energy company has also improved in the six months ended 31 October 2020, with the total income increasing 16 per cent to £4.4 million.
ITM Power possesses growth potential with various countries, including the UK developing green hydrogen roadmaps.
Naked Wines PLC (LON: WINE)
The online wine retailer has been through a vital period in the previous six months. However, the company has been successful in delivering exceptional growth because of a surge in new customers during the lockdown period contributing to a significant rise in sales.
In the first half of the FY 2021 ended 28 September 2020, Naked Wines reported 80% Y-o-Y growth in its revenue to £157.1 million, driven by the repeated consumer contribution of £36.2 million. For the full year, the company expects to achieve growth in sales in the range of 55% to 65%.
Apart from the above-mentioned stocks, below are some more small-cap stocks that can be looked at:
|
NAME OF THE COMPANY |
TICKER |
MARKET CAPITALISATION |
1-YEAR RETURN |
|
EKF Diagnostic Holdings PLC |
EKF |
334.42 |
122.73% |
|
Clipper Logistics PLC |
CLG |
574.88
|
100.18% |
|
Treatt PLC |
TET |
570.12 |
77.04% |