Sometimes, when you're thinking big, it pays to begin thinking small. Investing in small-cap stocks -- companies with market caps below $2 billion -- is risky, but the payoffs can be huge if you do your research and pick the right names. 

Zuora (NYSE:ZUO), Waitr Holdings (NASDAQ:WTRH), and Camping World Holdings (NYSE:CWH) are three stocks that have big dreams and small market caps. Let's take a closer look at these three small-cap stocks to buy right now. 

A woman celebrating the upward moving stock chart behind her.

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In the paraphrased words of Pink Floyd, all we are is just another brick in the paywall. We're shifting to a subscription-based economy, and Zuora is making it easy with its cloud-based platform that automates subscription order-to-revenue operations in real time. 

Zuora's potential is huge, even if its recent financial performance won't blow you away. Revenue growth is decelerating sharply for the third-consecutive fiscal year and we're down to top-line gains of just 8% in back-to-back quarters. Its 99% dollar-based retention rate -- meaning that the average returning customer is spending just 99% as much as it was a year earlier -- isn't going to be very exciting to Software-as-a-Service, or SaaS, investors spoiled by expansion rates of 120% or better.

The retention rate has also been trending lower over the past two years, with seven quarters of sequential declines before stabilizing in this month's fiscal third quarter.

  • Q3 2019: 115%
  • Q4 2019: 112%
  • Q1 2020: 110%
  • Q2 2020: 107%
  • Q3 2020: 106%
  • Q4 2020: 104%
  • Q1 2021: 103%
  • Q2 2021: 99%
  • Q3 2021: 99%

The reason that Zuora makes the cut is because it's in the right place with its model. The 8% growth in revenue that it posted earlier this month was better than expected, and it's the fourth straight report when its loss is smaller than Wall Street pros were modeling. Subscription revenue that makes up 80% of its business rose by an encouraging 15%. Transaction volume through its billing platform soared 31%. There's more to Zuora than meets the eye.

A man in a mask delivering a bag of food to a woman in a white shirt.

Image source: Getty Images.

Waitr Holdings

This has been a big week for food-delivery apps with the steaming hot DoorDash IPO, but not every restaurant has the benefit of a growing fleet of drivers willing to deliver takeout orders to make ends meet. Waitr Holdings caters to rural markets with its platform that makes it easy for small-town eateries to take orders online on turf where the major third-party delivery apps can't build the kind of scale they need to feasibly work. Waitr Holdings also acquired delivery platform Bite Squad to help on the fulfillment front when needed. 

Waitr Holdings isn't growing as quickly as the larger platforms, but that isn't a bad thing. Revenue rose just 7% in its latest quarter, but unlike the big boys, Waitr Holdings is actually profitable despite its small base of 2 million active diners and taking an average of less than 40,000 orders a day.

Waitr Holdings surprised the market by posting positive net income two quarters ago and expanding on that profitability in its latest report. Trading at just 20 times forward earnings, it's the one reasonably priced player in this niche. It doesn't matter whether the company gets gobbled up at a premium by one of the fat cats or continues to plot a course of slow-yet-profitable growth -- shareholders seem to win either way.

Exterior of the Camping World store in Bowling Green.

Image source: Camping World Holdings.

Camping World 

A lot of people are buying motorhomes and RV towables these days, and it makes sense. Getaways by plane and hotel stays aren't safe or comfortable in the new normal, and good luck getting on a cruise ship anytime soon. Camping World is the country's leading RV retailer, and business is booming. 

Revenue rose 21% in its latest quarter, and that's with its empire shrinking from 209 locations to 163 stores over the past year. Don't worry about the smaller store count. Camping World spent the past few years acquiring outdoor sporting-goods chains, and last year, it decided to move on from any store where it couldn't sell or at least service RVs. It's actually still growing as it acquires independent RV sellers in this highly fragmented industry.

It's natural to wonder what will happen to Camping World after the pandemic. Will we still want to circle the blue highways of the country with a home on wheels? Will we enjoy fresh air and a change of scenery as we hit up the more than 13,000 campgrounds across the country? Will more remote jobs be possible where RV living is possible?

I think you know the answer to all of these questions. The RV Industry Association expects wholesale RV shipments to grow by nearly 20% next year.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.