3 Top Small-Cap Stocks to Buy Right Now

Business man looking at pile of money with magnifying glass

Companies with large market capitalizations tend to grab the most financial headlines, but plenty of small-cap stocks deserve attention from investors, too.

These small-caps stocks are worthy of a closer look, according to these three Motley Fool contributors: Q2 Holdings (NYSE: QTWO) , Viking Therapeutics (NASDAQ: VKTX) , and OrganiGram Holdings (NASDAQOTH: OGRMF) .

Leveling the playing field

Brian Feroldi (Q2 Holdings): Would you open an account at a new bank if you couldn't access your money online? I know I wouldn't, and I don't think that I'm alone. Modern banking customers simply expect to be able to bank online.

This isn't a big problem for megabanks, which have huge resources at their disposal. But it is a problem for small regional and community banks with more-limited budgets. So how can the local credit unions and regional banks compete in today's digital landscape?

One answer is to become a customer of Q2 Holdings. It's a software company that helps banks of all sizes to offer their customers digital services. The company's technology allows customers to fulfill a range of processes such as mobile banking, online bill pay, peer-to-peer payments, and more.

Demand for Q2's services has grown quickly over the last decade as more banks warm up to the benefits of allowing their customers to bank online. The company now counts more than 12 million individual banking customers on its platform as of the end of September. That figure was up more than 24% versus the year-ago period.

Q2 has come a long way since its founding, but there is ample reason to believe that the company is just getting started. Management estimates more than 11,000 banks in the U.S. could eventually become customers. That means that the company's current penetration rate is about 3%, leaving ample room for growth.

Meanwhile, Q2's stock has been hit hard by the recent broader market sell-off. Shares are down more than 25% from their recent high. With double-digit growth on the horizon, I think that Q2 is a great small-cap stock for investors to check out right now.

The right place at the right time

Keith Speights (Viking Therapeutics): Several players in the biopharmaceutical industry are in the middle of a gold rush of sorts. They're scrambling to develop therapies to treat nonalcoholic steatohepatitis (NASH), an indication that some observers predict will become a $35 billion annual market in the not-too-distant future. One small biotech that is definitely in the right place at the right time for this promising NASH market is Viking Therapeutics.

With a market cap of just $550 million, the stock is cheap considering the promise for its lead candidate VK2809. Viking reported positive results for the drug in September in treating nonalcoholic fatty liver disease (NAFLD) and elevated LDL cholesterol. NASH is the most serious type of NAFLD. It's not surprising, therefore, that Viking plans to initiate another study in 2019 for VK2809 targeting the treatment of NASH.

I think that VK2809 makes Viking Therapeutics an attractive acquisition candidate for several larger companies. NASH is a disease where combination therapies could prove to be the most effective treatment. The addition of VK2809 would be a nice boost to the pipeline for quite a few big players focusing on NASH development.

Viking has another promising drug, too. VK5211 showed potential in helping patients enrolled in a phase 2 clinical study recover from hip fracture. Although Viking's experimental NASH drug is the big draw for this biotech, its other pipeline candidate is like icing on the cake.

Going green in 2019

Sean Williams (OrganiGram Holdings): Though not traditionally thought of as value plays, a small handful of marijuana stocks stand out with reasonable P/E ratios relative to their growth rates. Perhaps none is more attractive on a fundamental basis than New Brunswick-based OrganiGram Holdings.

Whereas most growers with more than 100,000 kilograms in estimated peak production are valued at north of $1 billion (or very much near it), no top-tier producer has a smaller market cap than OrganiGram at only $400 million. According to recent company updates, it should complete its three-stage phase 4 expansion in Moncton, New Brunswick, by April, August, and October of 2019, respectively. Once complete, and when fully licensed and permitted for sale, OrganiGram should be capable of 113,000 kilograms at peak output .

I could possibly understand OrganiGram's low valuation relative to its output if it had higher production costs, but the fact is that its per-gram cash costs might be lower than most (or all) top-tier growers. That's because OrganiGram is operating at a single grow site, helping to reduce costs, and it's also using a three-tiered growing system. It takes just 490,000 square feet of growing space to produce 113,000 kilograms. Meanwhile, other growers are struggling to yield 75,000 kilograms spanning 1 million to 1.1 million square feet of capacity. OrganiGram is the epitome of cannabis-growing efficiency.

This is also a pot stock that should be profitable in 2019, and that holds geographic advantages in the Atlantic. It may initially receive a boost from fair-value adjustments on biological assets (i.e., cannabis plants), but should be profitable on an operating basis sometime next year. At just 13 times forward earnings, and with triple-digit sales growth possible through 2020, OrganiGram looks ripe for the picking.

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Brian Feroldi owns shares of Q2 Holdings. Keith Speights has no position in any of the stocks mentioned. Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of Q2 Holdings. The Motley Fool recommends OrganiGram Holdings. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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