Please ensure Javascript is enabled for purposes of website accessibility

3 Top Small-Cap Stocks to Buy in September

By James Brumley – Updated Sep 10, 2021 at 9:14AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors don't have to limit themselves to big companies to generate big returns. You can think small too and still come out ahead.

If you're like many stock investors, most of your holdings are big companies. And that's perfectly understandable. Not only are there more shares of these stocks to go around, but people also tend to invest in companies they're relatively familiar with.

However, by not holding stock in many (or any) small-cap companies (stocks with a market cap between $300 million and $2 billion), you're missing out not just on company-specific opportunities, but on bullishness that can take shape when the broad, large-cap-led market turns bearish. These two investment groups don't always move in tandem.

With that as the backdrop, here's a closer look at three quality small-cap stocks to buy this month, none of which are household names, or even names most people have heard of.

a man sitting at a table stacks small trees atop an ascending row of coin stacks. The person  also holds a pen and enters numbers on a calculator

Image source: Getty Images.

1. A10 Networks

Market cap: $1.04 billion

When most investors think of app optimization, cloud security, and digital traffic management opportunities, names like Crowdstrike and Twilio come to mind. Not only are they big, but these companies are also often headline fodder.

An organization doesn't have to be big to be worthy of holding in your portfolio, however. Take A10 Networks (ATEN -0.22%) for instance. While it's a small company, it certainly looks and performs like a bigger one, boasting customers ranging from Yahoo to Microsoft to Comcast, just to name a few.

Simply put, A10 helps its client companies secure their apps, detect and defend against distributed denial of service (DDoS) attacks, and optimize network traffic. The need for such tools only continues to swell. Mordor Intelligence estimates that spending on denial of service defense will grow at an annualized pace of 17.7% through 2026, leading spending growth of 14.5% for the broader cybersecurity market. Clearly A10 is well-positioned for the future.

It may also be underestimated, however.

As of the latest look, analysts forecast top-line growth in excess of 7% for this year as well as next. But, for its second quarter ending in June, A10 Networks' sales improved nearly 13%, and the company anticipates revenue growth of between 7% and 12% for the third quarter currently underway. The scope of the need for digital defense continues to ramp up more than many people fully appreciate. That's not a trend that's apt to slow down anytime soon either.

2. Primoris Services

Market cap: $1.44 billion

Primoris Services (PRIM 1.08%) isn't growing all that quickly. In fact, it's not really a growth stock at all; single-digit percentage sales growth is the norm here. What this company lacks in red-hot growth, however, it makes up for in reliability and consistency.

Primoris Services is an engineering and construction outfit that specializes in underground pipelines, renewable energy facilities, and all sorts of infrastructure for utilities like power lines and telecom connections. It's anything but sexy, but it's also indispensable. Perhaps more than anything else right now though, the infrastructure industry's growth is underestimated. In a recent report based on research from Oxford Economics, PwC estimates worldwide capital expenditures on infrastructure like power generation, oil drilling and refining, and transportation are apt to reach a full-year tally of $9 trillion in 2025. Energy, in particular, is going to require more thoughtful investments, as the nation's (and the world's) population moves at the same time the grid itself is increasingly strained. A great deal of that spending will be on new power transmission lines alone, which the U.S. Energy Information Administration says has nearly quadrupled between 2000 and 2019, with more such spending growth on the way. That's a trend that plays right into Primoris' hand.

Except, these trends and outlooks may still fail to fully reflect the need stemming from the mainstreaming of environmentally-minded consumerism.

For the country's utility companies to reach their near-zero (net) carbon output goals within the next couple of decades, they're going to have to use every proverbial trick in the book. That's a smarter grid, more green energy production, and even more efficient transmission and use of fossil fuels like oil and gas. Primoris is ready for that future.

Finger pressing a red "buy" button on a computer keyboard.

Image source: Getty Images.

3. EnPro Industries

Market cap: $1.71 billion

Finally, add EnPro Industries (NPO 0.84%) to your list of top small-cap stocks to buy before the month comes to an end. Share prices have been sliding lower since June, but that pullback could easily reverse course as we move into what's typically a bullish year-end for the market. In the simplest terms, EnPro Industries makes high-performance materials for industries ranging from pharmaceuticals to semiconductors to packaged foods and more.

Analysts collectively expect EnPro to improve its top line by a little more than 4% this year before accelerating sales growth to a still-modest 7% next year. Earnings are on pace to improve only slightly better, remaining in the single-digit percentage range. 

Much like Primoris though, EnPro is also a name that could dish out some surprising growth once the pandemic's dust is finally done settling.

The key is the company's deliberate effort to focus more on technology customers and less on its industrial segment. Just a few days ago, it announced the completed sale of its polymers unit, further reshaping its portfolio following 2019's acquisitions of LeanTeq and Aseptic, and the purchase of Alluxa last year. While this shift gives the company a tighter focus (and possibly greater cross-selling opportunities), it also positions EnPro for higher-margin revenue and improved tech-driven growth. In the meantime, the dividend-paying stock is also a bargain while priced at only 14.3 times next year's expected earnings.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends CrowdStrike Holdings, Inc., Microsoft, and Twilio. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

A10 Networks Stock Quote
A10 Networks
ATEN
$18.23 (-0.22%) $0.04
Primoris Services Stock Quote
Primoris Services
PRIM
$21.58 (1.08%) $0.23
EnPro Industries Stock Quote
EnPro Industries
NPO
$119.55 (0.84%) $1.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.