We recently published a list of 10 Small Cap Stocks with Huge Upside Potential. In this article, we are going to take a look at where PDF Solutions, Inc. (NASDAQ:PDFS) stands against other small cap stocks with huge upside potential.
In times when everyone is chasing high-cap powerhouses, knowing the right stock to invest in at the right time and the right price is highly essential. In this race for Wall Street giants, one must slow down and ask if the stock is really worth it. Or better – is it set to yield the same returns as a high-growth small-cap stock? As Francis Gannon, Co-Chief Investment Officer at Royce Investment Partners, says:
“Small-cap stocks are a ‘forgotten’ group that present lucrative opportunities for investors seeking diversification amid market uncertainties.”
Small-cap stocks have a market capitalization between $300 million and $2 billion. Although generally more volatile and risky, history shows that small-cap stocks have often outperformed large-cap stocks. During the tech bubble of the 1990s, large-cap stocks were everyone’s favorite, until the bubble burst in March 2000, when more and more small-cap companies witnessed better performance. In general, the performance of the stock doesn’t entirely depend on whether the stock is large-cap or small-cap but more on where the macro and micro environments are taking the business. However, since the small-cap stocks are usually away from the analysts’ eyes, they are more undervalued, and so can provide a solid return on the investment.
Since there is a high growth potential for such a stock, small-cap stocks are highly valued by analysts. As the business itself is in an early stage of growth, there is more room for a stock boom. Volatility is another reason for holding these stocks. There is an increased likelihood of short-term trading and price swings that an investor can capitalize on. Additionally, many such stocks operate in specialized or niche markets, allowing the analysts to leverage interesting and unique business models, and that too, if successful, can return immensely. The fact that small-cap stocks are common targets for mergers and acquisitions is another reason to believe in these stocks. Analysts keep track of these stocks with the expectation of buyouts, which often leads to a premium in share price.
A research report by John Hancock Investment Management on understanding the performance of small-cap stocks indicated that, historically, small-cap stocks have had higher average returns than large-cap stocks. As small-cap stocks work well in diversified portfolios, they behave differently than large-cap stocks. The study examined the existence of size premiums in the United States, emphasizing the historical performance of Fama/French U.S. Small and Large Cap portfolios. The findings show that since the 1920s, small-cap stocks have outperformed large-cap stocks. Another research by Invesco in 2020 revealed that small caps have outpaced large caps from the past four recessions in all but one of the following 1- and 3-year periods.
To decide which small-cap stock is right for you, it is pertinent to monitor closely not only the stock itself but also its peers, as it provides a bigger picture. The factors that are crucial in the choice you make include the liquidity position, sensitivity to market swings, financial stability, and connection to AI. The stocks that we have selected are among the ones yielding high upside potential across a range of industries like financial, food, and mining.
Our Methodology
We have used Finviz and Stock Analysis screeners to select ten stocks with market capitalizations between $300 million and $2 billion. The one-year price targets have been extracted from Yahoo Finance to calculate the upside potential based on the stocks’ prices as of March 28, 2025. These companies are then listed according to their upside potential.
At Insider Monkey, we are obsessed with hedge funds. 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A Software-as-a-Service interface illustrating the interconnectivity of users and the internet.
PDF Solutions, Inc. (NASDAQ:PDFS)
Upside Potential: 88%
Market Capitalization: $754.114 million
PDF Solutions, Inc. (NASDAQ:PDFS) is a data solutions provider that empowers enterprises in the semiconductor and electronic market to enhance operational efficiency and improve the overall quality of their products. This small-cap company delivers its offerings to Fortune 500 Companies to achieve smart manufacturing goals. Ever since its incorporation in 1991, PDFS has been an invaluable partner to over 130 semiconductor companies.
With the company’s recent acquisition, we can say that PDF Solutions, Inc. (NASDAQ:PDFS) is on a path to recovery after the unimpressive 2024 results and 2025 guidance. This deal with secureWISE, a widely used remote connectivity solutions provider in the semiconductor industry, is a huge step forward as this would mean a 21-23% revenue growth within the year. Although the earnings for 2026 would reflect a more profound impact, sales guidance suggests around an $18 million contribution per annum.
Like any other high-growth company, PDF Solutions, Inc. (NASDAQ:PDFS) firmly embraces AI. The company is adopting the eProbe purchases model and aiming to expand the applications for advanced logic and DRAM. While maintaining a more balanced spread across system enterprises, foundries, IDMs, and fabless, the tech giant has indulged in some diversification over the years. The customers’ enhanced interest in the DFI eProbe system is the basis of a strong footing for the company in the industry.
The analysts at Stock Scan are highly optimistic about the company’s future performance. By the year’s end, PDF Solutions, Inc. (NASDAQ:PDFS) is anticipated to surge by over 120%, with the stock price rising to an average of $51.18 by late next year. For investors valuing high returns, PDFS is one of the best stocks with the biggest upside, considering the dip the stock is currently experiencing.
Overall, PDFS ranks 8th on our list of small cap stocks with huge upside potential. While we acknowledge the potential of PDFS, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than PDFS but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.