You don't need tons of money to get started in the stock market -- an opening investment of just $500 could help set the stage for life-changing returns. Let's explore the reasons why Duolingo (DUOL -1.55%) and Dream Finders Homes (DFH -0.72%) could be great long-term bets because of their rapid growth rates and relatively small market caps.

1. Duolingo 

Duolingo operates an online language-learning application in the U.S. and China that offers courses in 40 different languages. Positioned in a fast-growing industry and boasting an economic moat, this mid-cap company has what it takes to deliver multibagger returns as its business scales up. 

$500 dollars in $100 bills

Image source: Getty Images.

Analysts at Brandessence Market Research expect the global language learning industry to expand at a compound annual growth rate of 18.7% to $173 billion by 2027 as globalization drives demand. Duolingo's edge comes from its freemium strategy, which allows it to collect data from users (to improve the experience) and rely on word of mouth to drive customer acquisition instead of marketing. 

First-quarter revenue soared 97% to $55.4 million, and paid subscribers grew 64% to 1.8 million -- which is just under 5% of its 40 million monthly active users. Duolingo has a huge opportunity to convert more unpaid users into paid users or monetize them through advertisements (which represented 17% of sales in 2020). The company can also drive growth through paid services like its $49 English proficiency test.

With a market cap of $4.65 billion, Duolingo trades for 29 times its 2020 sales of $162 million. That's a pricy valuation, but it makes more sense when you consider the company's growth rate. That said, investors may want to wait for a few more quarters of data before taking a position in the stock. 

2. Dream Finders Homes 

Dream Finders Homes is a home building and mortgage company that went public in January. Shares have experienced significant volatility since the IPO, but it is an excellent pick for investors because of its dirt-cheap valuation and unique, asset-light business model. 

Dream Finders doesn't hold land on its balance sheet long-term. Instead, it purchases contracts on land without actually owning the property until it is ready to build. This strategy can reduce the company's exposure to macroeconomic volatility and potentially boost growth by freeing up capital for other endeavors (such as acquisitions). Second-quarter revenue grew 83% year over year to $365 million, and pre-tax income soared 193% to $37 million. 

Dream Finders is keeping the momentum going with a string of acquisitions. In February, it incorporated Century Homes Florida. This deal follows the 2020 acquisition of H&H Homes, which operates in the Carolinas. The company can create value by synergizing its asset-light business models into these new businesses.

With a forward price-to-earnings multiple of just 12, Dream Finders is cheap compared to the S&P 500 average of 31 -- especially considering its rapid growth rate. But the company does command a premium over other large homebuilders like D.R. Horton and KB Home, which trade for eight and six times forward earnings, respectively. 

Small size + rapid growth = epic potential 

Everyone wants to bet on a winning stock while it's cheap and undiscovered. Duolingo and Dream Finders both went public this year -- and their modest market caps and breakneck growth rates speak to their multibagger potential. These companies also boast competitive advantages in their niches, which is icing on the cake for potential investors.