Lower-priced stocks tend to have smaller market caps, making them a great way to get in early on a company's long-term growth potential. Both trading below $10 a share, Curiosity Stream (CURI 2.06%) and Luckin Coffee (LKNC.Y -1.59%) fit the bill.

Let's explore the reasons why these small-cap stocks have large-cap potential. 

1. Curiosity Stream

With a share price of $9.79 and a market cap of just $515 million, Curiosity Stream is tiny compared to streaming rivals like Netflix and Disney, which boast market capitalizations of $216 billion and $307 billion, respectively. The stock tanked after weaker-than-expected earnings, but its strong guidance and rapid growth rate make it a screaming buy. 

Flaming stock-chart arrow zooming upward.

Image source: Getty Images.

First-quarter revenue grew by 33% year over year to $9.9 million, representing a deceleration from the 70% increase recorded in the fourth quarter. Shares were down 27% at one point following the earnings release on May 12, but is still down 14% at the time of publishing. Still the sell-off looks like an overreaction since management reaffirmed its full-year guidance for $71 million in sales that would represent 80% growth over 2020. 

Curiosity Stream's subscription-based business model makes sales easy to predict. And management claims to have 90% visibility on future revenue, so growth will likely accelerate to meet forecasts. 

The acquisition of One Day University should also bolster Curiosity Stream's top line in the next few quarters. One Day University is a platform featuring over 500 unique talks and lectures from professors at over 150 colleges and universities. The combination looks synergistic with Curiosity Stream's core business of producing video-form educational content. 

2. Luckin Coffee

Known for its high-profile sales fraud and subsequent bankruptcy, Luckin Coffee has fallen off the radar for many mainstream investors. But behind the smoke and rubble lies a rapidly growing business with a decent balance sheet, and it might just be time to give this embattled Chinese coffee shop chain another chance as it seeks to get back on track. 

In February, Luckin filed Chapter 15 bankruptcy (a section of the bankruptcy code that deals with foreign companies) to shield itself from U.S. lawsuits while getting its finances in order. In March, it announced a deal to restructure 59% of its $460 million in debt to help improve its capital structure. 

Creditors will receive a combination of cash (32% of par), new debt (53% of par), and additional shares (6% of par) in exchange for their notes. This deal will reduce the total amount of debt outstanding. 

With $742 million on its balance sheet (as of December 2020) plus an additional $250 million in equity financing raised in April, Luckin looks capable of meeting its obligations. Net revenue is estimated to have grown as much as 39% to 4.2 billion Chinese renminbi ($652 billion) in 2020. And the company expects to reach its cash-flow breakeven point by the first half of 2023. 

Get in before the crowd arrives

With price-to-sales (P/S) ratios of 11.4 and 2.6, respectively, Curiosity Stream and Luckin Coffee are attractively valued, considering their growth rates and long-term catalysts for success. 

But trading for just 2.6 times sales, Luckin is more likely to deliver multi-bagger returns if it can successfully restructure and return to normal financial reporting (we have to rely on its liquidator's report for operational data). Curiosity Stream is a less volatile bet. But it could also enjoy mouth-watering gains because of its breakneck growth rate.