It may sound obvious, but you shouldn’t invest in micro-cap stocks, or any stocks, for that matter, that have yet to exhibit tangible signs of long-term success. Broadly speaking, there are only two:
- Sustained growth in market share, as highlighted by top-line revenue.
- Profitability, ideally measured by net income, though free cash flow or adjusted EBITDA can be justified for industries where running on a loss isn’t such a big deal, supposing the company satisfies the market’s growth expectations.
While profitable growth is the ideal, these signs rarely appear at the same time, forcing investors to bust out their magnifying glasses and assess whether the missing sign is likely to appear. Here are three such assessments to consider over the weekend, each of which revolves around a micro-cap growth company interviewed by Stockhouse this past week.
Nanalysis Scientific
Nanalysis is a scientific equipment and security services provider. It offers safer, more affordable nuclear magnetic resonance (NMR) spectrometers for laboratory and industrial markets, while maintaining a strong innovation pipeline and global presence across Canada, the United States, Europe and Japan.
The company’s technology enables authentication, quantification and experimentation in diverse industries, including oil and gas, chemical, mining, pharma, biotech, flavour and fragrances, agrochemicals, law enforcement, as well as government and university research, granting it an estimated US$4 billion addressable market according to its February 2024 investor presentation.
Nanalysis has made a decisive entrance into its slice of the scientific instrumentation market, growing revenue every year from C$7.87 million in 2020 to C$28.47 million in 2023, followed by a hefty C$11.16 million in Q1 2024 and C$11.47 million in Q2 2024. This is supported by consistent though fluctuating gross profitability that suggests a path for scale to lead to net income.
With multiple product announcements expected by year end, and a cost-reduction program making its way through the business, Nanalysis stock (TSXV:NSCI) remains down by 4.44 per cent since 2019, making the market’s ignorance your exposure to a strong case for a share-price re-rating.
Sean Krakiwsky, Nanalysis’ founder and chief executive officer, joined Stockhouse’s Lyndsay Malchuk to discuss the company’s Q2 2024 results. Watch the interview here.
Tribe Property Technologies
Our second micro-cap growth stock, Tribe Property Technologies, offers a platform to streamline and digitize the North American construction and property management industry, decreasing customer acquisition costs, increasing retention and bolstering revenue through value-added products and services. The company is the second-largest multi-family rental management company in Canada, including more than 19,000 units, with more than 40,000 strata and condo units managed nationally, and more than 100 real estate developers as clients.
Tribe Property, like all the companies discussed here, has delivered significant growth to its shareholders, generating C$4.21 million in revenue in 2020 and C$19.39 million in 2023, with the recently closed acquisition of DMSI Holdings, a Toronto-based rental and commercial management services company, set to increase Tribe Property’s proforma annualized revenue run-rate to C$31 million.
In terms of profitability, the company achieved record revenue in Q2 2024 while growing adjusted EBITDA by 47 per cent, a metric it expects to come in positive in 2024, leading to positive cash flow in 2025.
The market vehemently disagrees that Tribe Property Technologies (TSXV:TRBE) has any shareholder value to offer, having tanked the stock by 55.68 per cent year-over-year and by more than 90 per cent since listing in 2021. Contrarian play, anyone?
Joseph Nakhla, Tribe Property’s chief executive officer, spoke with Lyndsay Malchuk about the company’s Q2 2024 results. Watch the interview here.
GameSquare Holdings
Our final micro-cap growth stock this week is GameSquare Holdings, which is dedicated to revolutionizing how brands and game publishers connect with Gen Z, Gen Alpha and Millennial audiences. The company’s platform is composed of media, entertainment and technology assets designed to optimize client outcomes and return on investment. These include award-winning marketing and creative services, data and analytics solutions, as well as FaZe Clan, a globally influential gaming organization commanding 38 per cent of all esports engagement with more than 500 million followers.
GameSquare has managed to build one of the largest gaming media networks in North America, according to Comscore, and attract high-profile investments from the Goff family and Dallas Cowboys owner Jerry Jones, thanks to a string of savvy acquisitions that have propelled revenue from US$4.22 million in 2019 to US$52 million in 2023, followed by more than US$46 million through 2024.
The company has balanced its 10x revenue growth with clear sight to generate positive adjusted EBITDA by Q4, according to its Q2 2024 news release, which should give the market a good reason to retrace some of the stock’s (NDAQ:GAME) 82.24 per cent loss since listing on the Nasdaq in April 2023.
Justin Kenna, GameSquare’s chief executive officer, spoke with Lyndsay Malchuk about how the company’s track record has set it up for future growth. Watch the interview here.
Join the discussion: Find out what everybody’s saying about these micro-cap growth stocks on the Nanalysis Scientific Corp., Tribe Property Technologies Inc. and GameSquare Holdings Inc. Bullboards and check out Stockhouse’s stock forums and message boards.
This is sponsored content issued on behalf of Nanalysis Scientific Corp., Tribe Property Technologies Inc. and GameSquare Holdings Inc., please see full disclaimer here.
(Top photo of Nanalysis Scientific’s Benchtop NMR spectrometre: Nanalysis Scientific)