A few well-chosen small-cap stocks can help to turbocharge your investment returns. That's because young, rapidly expanding businesses with large addressable markets and strengthening competitive advantages can add an element of exponential growth to your portfolio -- the type that can turn relatively small amounts of money into hefty sums over time.

The challenge, of course, is identifying these future star stocks among the far larger number of also-rans. Fortunately, I believe I've found one such stock.

A fitness coach helping a woman train with kettlebells.

Image source: Getty Images.

Mindbody (MB) is the leading cloud-based software platform for the global fitness, wellness, and beauty services industry. Mindbody's software helps these often small- and midsize-businesses run their operations more efficiently and profitably, with tools like online appointment setting, staff management, marketing, analytics, and payments, among others. Moreover, with plans starting at $125 per month, Mindbody offers a scalable platform that can grow along with its customers. The company says that its offerings are therefore appropriate for local businesses all the way up to national chains and large enterprises. 

A massive growth opportunity

In all, Mindbody has 58,000 business subscribers who employ 395,000 practitioners and serve 43 million consumers. In turn, 173 million classes and appointments were booked through Mindbody's platform in the first quarter, and $8.3 billion in payments volume was processed via its network in the past year. Yet these figures represent just a fraction of Mindbody's total market opportunity; there are an estimated 4.2 million wellness-focused businesses worldwide, and the industry is growing at more than 17% per year. And as my colleague Brian Withers notes, even just its core English-speaking markets provide Mindbody with an opportunity to grow its customer base as much as five times over its current level. As such, Mindbody has long-runways for growth ahead.

The strong get stronger

Better still, Mindbody has a strong track record of intelligent acquisitions that have helped to add complementary technologies to its platform, thereby increasing its value proposition to the businesses its serves and the customers they serve. In fact, its most recent acquisition may turn out to be its best yet. By purchasing rival Booker Software, Mindbody will acquire an additional 10,000 high-end salon and spa customers who helped to generate $25 million in subscription and payments revenue in 2017. That's a significant sum for Mindbody, which generated $182.6 million in revenue -- a 31% year-over-year increase -- last year. The deal will also add Booker's well-regarded artificial intelligence-powered marketing tools to Mindbody's platform, which will help to further strengthen and expand its already best-in-class suite of services.

Value in disguise

It's difficult to value Mindbody based on traditional metrics. The company is not yet profitable on a GAAP basis, so price-to-earnings ratios are not yet meaningful. Looking at revenue-based metrics, we see that Mindbody's shares are currently trading at about 10 times sales based on its market cap and about 8.6 times revenue based on its enterprise value. Skeptics may balk at these figures as being too rich, but the best growth stocks often only seem cheap in hindsight. In fact, I'd argue that Mindbody's current $1.9 billion market underestimates its chances at acquiring the lion's share of a market opportunity the company pegs at more than $15 billion, and that should only grow larger as more people begin to integrate wellness programs into their lives. If I'm right, long-term investors who buy today should be well rewarded.