In this article, we will be taking a look at the 9 High Growth Small Cap Stocks That Are Profitable.
As strategists weigh solid earnings momentum against expensive valuations and longer-term dangers, market opinions are still divided. Even while stocks have consistently performed better than anticipated, investors are becoming more concerned about whether gains are sustainable and whether risk is being fairly priced.
The head of equities and portfolio strategy at CIBC, Chris Harvey, told CNBC that the S&P 500 may eventually hit 7,450, but he anticipates a decline first. Harvey claims that even though the fundamentals are still the same, risk assets are currently too costly and require a repricing. He believes investors would embrace greater diversification and better risk-reward possibilities, concentrating on areas where fundamentals might improve, rather than concentrating on specific businesses.
UBS supports the bullish results estimate, pointing out that corporate profits have exceeded expectations, with the technology sector leading the way. Even in the face of macroeconomic uncertainty, forward profit predictions hold up well. According to UBS, ahead P/E multiples are just marginally higher than they were at the beginning of the year, indicating that recent market gains have been driven by earnings growth rather than excess valuation. UBS anticipates that profit growth will continue to be a major factor driving equities, and bottom-up earnings projections are still rising.
Still, caution persists. Strategists at Bank of America predict that the S&P 500 will return -0.1% over the next ten years due to high valuations and a string of solid gains. Based on current and future P/E levels, Torsten Sløk, chief economist at Apollo, also anticipates that the market will stay relatively flat.
On the other hand, despite a waning Santa Claus surge, David Wagner of Aptus Capital Advisors is still upbeat and sees pullbacks as healthy and typical.
Our Methodology
Our methodology involved first filtering stocks with a market capitalization between $300 million and $2 billion, a five-year revenue growth of at least 20%, and profit margins of at least 15%. From this filtered list, we selected the top 9 stocks and ranked them in ascending order based on their revenue growth.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
Here is our list of 9 high growth small cap stocks that are profitable.
9. Old Second Bancorp, Inc. (NASDAQ:OSBC)
Revenue Growth (5y): 21.26%
Net Profit Margin: 24.11%
Market Capitalization: $1.04 billion
Old Second Bancorp, Inc. (NASDAQ:OSBC) is placed ninth on our list of high-growth stocks.
TheFly reported on January 23 that DA Davidson raised its price target for OSBC to $23 from $22 and maintained a Neutral rating following the company’s fourth-quarter earnings. The firm noted that the impact of the Evergreen acquisition was clearly reflected in Q4 results, with a very strong net interest margin alongside higher-than-normal net charge-offs. DA Davidson added that while growth is expected to improve in 2026 with solid cost control, the elevated level of non-performing assets compared with peers remains a key risk to monitor.
Old Second Bancorp, Inc. (NASDAQ:OSBC) reported a strong fourth quarter marked by solid growth in net interest and dividend income, which rose to $83.1 million. Profitability remained among the strongest in the industry, supported by a resilient tax-equivalent net interest margin of 5.09% and an adjusted efficiency ratio of 51.28%. Management highlighted that the company’s strong earnings performance and balanced growth helped improve capital strength, with tangible common equity and tangible book value both increasing despite acquisition-related dilution.
Old Second Bancorp, Inc. (NASDAQ:OSBC) is a regional bank holding company headquartered in Aurora, Illinois, providing community banking services through Old Second National Bank. It offers retail and commercial banking, loans, deposit accounts, trust and wealth management, and other financial services.
8. SkyWater Technology, Inc. (NASDAQ:SKYT)
Revenue Growth (5y): 21.42%
Net Profit Margin: 36.35%
Market Capitalization: $1.63 billion
The eighth stock on our list of high growth stocks is SkyWater Technology, Inc. (NASDAQ:SKYT).
TheFly reported on January 27 that TD Cowen downgraded SKYT from Buy to Hold while increasing its price target to $35 from $24. The change followed the company’s agreement to be acquired by IonQ in a deal valuing SKYT at $35 per share, or approximately $1.88 billion.
Similarly, on the same day, Craig-Hallum also downgraded SkyWater Technology, Inc. (NASDAQ:SKYT) from Buy to Hold and set a $35 price target following the announcement of its acquisition by IonQ. The firm indicated that the transaction is likely to be completed and said that potential concerns from other quantum customers are unlikely to derail the deal. Craig-Hallum also pointed out that SKYT’s shares are trading within roughly 10% of the agreed transaction price.
SkyWater Technology, Inc. (NASDAQ:SKYT) is a U.S.-based pure-play semiconductor foundry providing design, development, and manufacturing services for chips across aerospace, defense, automotive, and industrial markets. The company supports secure domestic production with advanced fabrication capabilities and strategic partnerships to strengthen the U.S. semiconductor supply chain.
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