Stock Market

7 Small-Cap Growth Stocks Trading at a Huge Discount Right Now

When equities are under pressure, it is particularly important for investors to find stocks that are trading at a discount to their intrinsic value. This can be particularly difficult if you’re interested in finding small-cap growth stocks trading at a discount.

The widely accepted definition of small-cap companies are those with a market capitalization of less than $2 billion. The allure of small-cap stocks is easy to see. The stocks generally trade for a low price. And if investors buy them at the right time, there is the possibility for outsized gains.

However, that potential for a reward also carries an outsized level of risk. And during market corrections and bear markets, these stocks can drop much further than the market average.

With all that said, every sector has undervalued stocks and the small-cap sector is no different. Therefore, if you’re an investor who is comfortable with the risks involved with small-cap stocks, here are seven small-cap growth stocks trading at a discount right now:

Ticker Company Price
HCAT Health Catalyst, Inc. $16.57
CRNC Cerence Inc. $27.47
FTCI FTC Solar, Inc. $4.73
SIX Six Flags Entertainment Corporation $22.47
PLAY Dave & Buster’s Entertainment, Inc. $37.02
BLMN Bloomin’ Brands, Inc. $20.36
COOK Traeger, Inc. $3.06

Small-Cap Growth Stocks Trading at a Discount: Health Catalyst (HCAT)

Source: metamorworks / Shutterstock

The first of my small-cap growth stocks trading at a discount is a company at the convergence of healthcare and technology. Specifically, Health Catalyst (NASDAQ:HCAT) gives investors exposure to the healthcare and data analytics sectors. The company’s vision is that in the future, all healthcare decisions will be informed by data.

To that end, the company uses its cloud-based data platform and data from over 100 million patient records to help healthcare organizations make decisions that can provide measurable, data-informed decisions.

Health Catalyst is not yet profitable, but that is expected by 2024. In the meantime, the company continues to grow revenue both sequentially and on a year-over-year (YOY) basis. Both revenue and earnings are expected to grow strongly over the next five years.

HCAT stock is down 72% from its 52-week high set in July 2021 and is down 58% in 2022 alone. However, analysts are generally bullish on HCAT stock and institutional investors continue to buy it.

Cerence (CRNC)

Source: Solveig Been/Shutterstock

The next stock on my list is also a technology stock. Investing in a company such as Cerence (NASDAQ:CRNC) is a bet on the idea that automobiles and the people that drive them are going to become more connected. Cerence is an artificial intelligence- (AI) powered assistant provider for connected and autonomous vehicles.

A powerful catalyst for the company is its partnership with CerebrumX and Amazon (NASDAQ:AMZN) announced in July 2022.

This partnership will combine Cerence’s Connected Vehicle Digital Twin platform with CerebrumX’s deep learning platform to create an AI-powered connected vehicle data platform that is built on Amazon Web Services (AWS).

Analysts are projecting Cerence to show low double-digit growth in both revenue and earnings per share in the next five years. The mean price target among 9 analysts is $42.11, which is approximately 52% higher than the current CRNC stock price.

Small-Cap Growth Stocks Trading at a Discount: FTC Solar (FTCI)

Source: Shutterstock

Investors who are looking for small-cap growth stocks trading at a discount frequently find themselves looking at penny stocks. That’s the case with FTC Solar (NASDAQ:FTCI). The company was established in 2017 and has only been trading publicly since 2021.

FTCI stock dipped into penny stock range in January 2022 and remains there as of this writing. The company provides solar tracker systems, technology, software, and engineering services to a range of customers. This is another company that is not yet profitable. However, FTC Solar’s earnings and revenue are expected to show strong growth as solar usage grows across the country.

The company also received two upgrades in July 2022 and has a “strong buy” from 8 analysts that have issued ratings on FTCI stock. The company is not yet on the radar of institutional buyers, which may make it an attractive buy for retail investors.

Six Flags Entertainment (SIX)

Source: Cvandyke / Shutterstock

If you’re an investor to whom the words “thrill seeker” means more than just a love of roller coasters, I would encourage you to take a second look at Six Flags Entertainment (NYSE:SIX).

I can understand why some investors would want to stay away from theme park related stocks. Depending on what metrics you look at it, the United States is already in, or headed for, a recession. And even if it’s not, the effects of inflation are being felt by consumers. It could be logical to believe that trips to a theme park may get cut out of budgets.

On the other hand, Six Flags operates properties that many consumers can access with an easy day’s drive. And the nature of these parks is that consumers can turn these excursions into a multi-day value vacation.

If you need more hard data to support that opinion, I’ll offer the fact that in the first quarter 2022 (historically the company’s weakest quarter), revenue was up 68% and earnings were up 32% on a YOY basis.

Small-Cap Growth Stocks Trading at a Discount: Dave & Buster’s Entertainment (PLAY)

Source: Rosemarie Mosteller /

Another small-cap stock that appears to be trading at a discount is Dave & Buster’s Entertainment (NASDAQ:PLAY). This is a company that was hurt badly by the restriction on gathering created by the Covid-19 pandemic. However, many entertainment venues are returning to business as usual. And, as of this writing, the emergence of a new variant of Covid-19 is not expected to cause further disruption.

Assuming that remains the case, investors may want to pay attention to PLAY stock. We are heading into the heart of fantasy football draft season and Dave & Buster’s has packages set up for league commissioners to level up their live draft experiences.

PLAY stock is down 10% in 2022 and it may be concerning to investors that it has failed to hold on to the gains it made after posting strong first quarter earnings. Still, analysts remain mostly bullish on the stock, which has an attractive price-to-earnings (P/E) ratio and expectations for strong growth in revenue and earnings in the next five years.

Bloomin’ Brands (BLMN)

Source: Shutterstock

Just as the restaurant industry was beginning to lift its metaphorical head above the waters of the pandemic, inflation is threatening to pull it back under. You can put it under the category of revenge spending, but for the first half of 2022, consumers appeared to have an appetite for dining out.

And that was good for Bloomin’ Brands (NASDAQ:BLMN). The company posted earnings and revenue that was higher not just on a YOY basis, but at higher levels than in the year before the pandemic. Some of this can be attributed to the company’s portfolio of popular, recognizable brands.

But what does the second half of the year suggest? Analysts believe the company is headed for further growth. BLMN stock offers 55% upside from its Jul. 26, 2022 price. Backing up that price target is a low P/E ratio of just 8x earnings. And earnings are expected to grow at a high single-digit level over the next five years.

Small-Cap Growth Stocks Trading at a Discount: Traeger (EAT)

Source: Traeger

The last of our small-cap growth stocks trading at a discount is Traeger (NYSE:COOK). The company makes its namesake wood pellet grills that combine an internet of things component. That makes these products ideal for millennial homeowners who are looking to accessorize their indoor and outdoor living spaces. It also capitalizes on the popularity of posting social-media worthy culinary creations.

The company may have picked the wrong time to go public. Since its initial public offering in July 2021, COOK stock has dropped nearly 80% and is now trading as a penny stock. With that said, earnings and revenue are expected to grow strongly over the next five years.

While analysts are bullish on the stock in general, many analysts lowered their price targets in the past few months. That may mean that bad news is already priced in. If the company can continue to deliver solid earnings and revenue, there may be an upside surprise.

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines. 

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.

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