Best Small Cap Stocks UK 2022

Small-cap stocks have developed some of the best companies to buy in the last 25 years. Mostly every stock market behemoth commenced existence as a small-cap firm. For example, Amazon stock was only $7 in 1998, while Tesla was valued at just over $17 in 2010.

Of course, not every small-cap firm grows into a behemoth. Investing in small businesses can be lucrative, but it also carries hazards that investors should be aware of. Despite the fact that these are often great companies, the stocks might be more volatile and difficult to get analyst research on. We’ll go over the top ten small-cap stocks to buy in 2022 and show you how and where to buy these stocks.

What are Small-cap stocks?

Small-cap stocks are shares in a firm with a market capitalization of between £300 million and £2 billion. Investing in a smaller company, like larger industry participants, can provide significant growth opportunities. They do, however, tend to provide long-term gains because they now lack the resources of larger-cap enterprises.

As a result, they may be more subject to bearish investor sentiment as well as bad happenings. The unpredictability of a small-cap company can grow as a consequence of these problems. Investing in such companies during a downturn is especially dangerous, as issuers are unprepared for significantly declining market demand.

Investors who want to buy stock in a small-cap firm should do their investigation and diversify their portfolio accordingly. Small-cap stocks are worth considering, but they shouldn’t make up the majority of your portfolio.

Top 10 Small-Cap Stocks to Buy UK in 2022

Thousands of small-cap stocks trade on the New York, London, and NASDAQ stock exchanges, making it challenging to identify small-cap equities. We’ve compiled a list of the top ten small-cap stocks to purchase in 2022:

  1. PayPoint Plc (LON: PAY)
  2. Keller Group Plc (LON: KLR)
  3. CarParts.com (NASDAQ: PRTS)
  4. BlueLinx Holdings Inc. (NYSE:BXC)
  5. Bakkavor Group Plc (LON: BAKK)
  6. Unisys Corporation (NYSE: UIS)
  7. Advanced Medical Solution (LON: AMS)
  8. Perion Network (NASDAQ: PERI)
  9. DWF Group Plc (LON: DWF)
  10. Titan Machinery Inc. (NASDAQ:TITN)

Top 10 Small-Cap Stocks Reviewed

1. PayPoint Plc (LON: PAY)

The firm provides a variety of services, including transaction processing of client electricity bills, as well as other goods and services. In the three months ending 30 June 2021, it reported sales of £28.1 million, up 21.3 percent. The varied business segment was responsible for the majority of the company’s revenue. The retail section accounted for 50.4 percent of total revenue, whereas the banking and payment section accounted for 45.8 percent. The e-commerce division brought in 3.8 percent of total revenue. The corporation operates a network of 28,436 retail locations and is gradually increasing revenue from other businesses.

PayPoint Plc’s current market cap is £410.01 million, while its current dividend yield stands at 5.65% as of March 2022.

PayPoint Plc’s stock is currently on the fall, giving investors the opportunity to purchase this small-cap stock at a discount. Its 52-week stock price high is 742 GBX, implying a 24 percent upside objective at the current price of 595 GBX.

2. Keller Group Plc (LON: KLR)

Keller is in the architectural industry, offering services including new construction ground development, slope stabilizing, large base build-up, and other relevant services. Following the Covid-19 outbreak, the company’s business has continued to recover well. According to the corporation, the year’s overall performance will be in line with market forecasts. Its current order book is at £1.2 billion, which is a new high.

Keller Group Plc’s current market cap is £614.01 million, while its current dividend yield stands at 4.23% as of March 2022.

Keller stock is also on a decline, which indicates this is an ideal time to buy its stocks. At the current price of 849 GBX, Keller’s 52-week stock price high is 1043 GBX, implying a 22 percent upside target.

3. CarParts.com (NASDAQ: PRTS)

CarParts.com, formerly known as U.S. Auto Parts, is an online auto parts company that has undergone a transformation under new ownership. The company consolidated its business by combining its web brands under the CarParts.com umbrella, and sales increased during the COVID-19 pandemic. CarParts.com is aggressively expanding its distribution facilities and investing in technology and marketing. It now has the ability to deliver to 80% of the country in two days.

Due to a semiconductor shortage in auto manufacturing, which is driving up new and used car costs, the e-commerce company appears to be poised for continuing expansion. The company is aiming for a long-term revenue increase of 20% to 25% and an adjusted EBITDA growth of 8% to 10%, indicating that the stock is more than just a pandemic tale.

CarParts.com’s current market cap is £335.02 million. Keller stock is also on a heavy decline from September 2021, and its price has dropped from $20.75 (£18.89) to $6.93 (£6.31) which makes it one of the cheapest small-cap stocks to buy now. 

4. BlueLinx Holdings Inc. (NYSE:BXC)

In the United States, the company provides construction materials for commercial and residential buildings. At the end of the third quarter, 14 hedge funds were long BlueLinx Holdings Inc.

Residential buildings in the United States had a surge in 2021, and this trend is expected to continue in 2022, as work-from-home trends fuel demand for new homes and upgrade existing ones.

Kurt Yinger of DA Davidson started analysis on BlueLinx on December 17 with a ‘Buy’ recommendation and a $102 price target. Yinger pointed out that the company is well-positioned to profit from cyclical rises in new housing construction products in the United States, and that the company’s improved balance sheet and a low valuation indicate to a promising medium-term to long-term path.

As of March, BlueLinx Holdings Inc. shares have gained 72.04% in the last 12 months, and 2.10% in the last 3 months.

BlueLinx’s current market cap is £704.81 million. BlueLinx stock has been rising high from the beginning of 2022, providing stockholders with a large profit. At the present price of $79.55 (£72.43), the stock’s 52-week high is $96.63 (£87.98), implying a 21 percent upside target.

5. Bakkavor Group Plc (LON: BAKK)

The company is in the food business, selling meals, bakery items, pizzas, and sandwiches in the United Kingdom and the United States. Despite multiple challenges such as labor shortages, supply chain disruptions, and increases in raw material prices due to inflation, the company announced £915.7 million in revenue from its overall business, while in the 26 weeks ending June 26, 2021, its operational profit climbed by 63.8 percent to £47 million. The company intends to produce growth in the second half of the current financial year, owing to positive volumes in the first half.

Bakkavor Group Plc’s current market cap is £660.55 million, while its current dividend yield stands at 5.79% as of March 2022.

However, Bakkavor stock has been on a decline for a long time from the last 5 years it has not yet achieved its IPO price which makes it an undervalued small-cap company. Its 52-week stock price high is 143.80 GBX, implying a 26 percent upside objective at the current price of 114 GBX.

6. Unisys Corporation (NYSE: UIS)

Unisys is one of the industry’s top undervalued small-cap stocks. It is currently selling at a P/E ratio of under 1.5. That’s a very low statistic for a business that offers IT solutions.

What’s more intriguing about Unisys is that it sold a section of its business for 13 times earnings shortly before the COVID-19 epidemic hit last year. That’s a large ratio, boosting Unisys’s value much above its present stock price. Long-term investors will be pleased to learn that Unisys intends to use the funds to pay down debt and expand its growth possibilities.

Unisys’ current market cap is £1.36 billion. Unisys’s stock provided huge profits to its holders in 2021 but currently, it is on a downward trend which makes a buying opportunity. Its 52-week stock price high is $28.60 (£26.04), implying a 27 percent upside objective at the current price of $22.38 (£20.38).

7. Advanced Medical Solution (LON: AMS)

The COVID-19 outbreak wreaked havoc on Advanced Medical Solutions, a UK small-cap firm focusing on surgical technologies. Elective procedures came to a standstill, and the stock fell 12% for the year, despite the fact that the stock market was growing.

However, we believe this presents an opportunity for UK investors. Due to a decline in sales in 2020, the firm is presently trading at a discount, but the vaccination launch means that procedures might restart at a regular rate as early as this summer. In November, Advanced Medical Solutions purchased a crucial supplier, which might help the company save money and improve its products.

Advanced Medical Solutions’ current market cap is £643.89 million, while its current dividend yield stands at 0.65% as of March 2022.

Advanced Medical Solutions stock has been rising continuously for a long time, providing stockholders with a large profit. Its 52-week stock price high is 347 GBX, implying a 16 percent upside objective at the current price of 298 GBX.

8. Perion Network (NASDAQ: PERI)

During the epidemic, ad tech stocks have risen in tandem with broader advances in digital advertising and linked TV. Perion Network, an Israeli startup that leverages its intelligent hub to connect marketers and publications, has been a significant winner. In an industry where companies normally cater to brands or publications, this makes it a unique proposition.

Microsoft is also a close partner; Perion is assisting Microsoft in monetizing their Bing search engine.

Perion has been aggressively expanding through acquisitions while building a premium ad position with features like QR scanning, customizable backdrops, and in-game adverts during sporting events. The company was on track to grow revenue by 42 percent in 2021 and 29 percent in 2022. It’s also profitable, like ACM Research.

Perion’s current market cap is £899.27 million. Its stock has risen continuously from 2021, providing stockholders with a goods profit. Its 52-week stock price high is $33.09 (£30.13), implying a 48 percent upside objective at the current price of $22.30 (£20.30).

9. DWF Group Plc (LON: DWF)

In the United Kingdom and the Middle East, the corporation provides professional business services such as legal services. The legal solutions division recorded total revenue of £338.1 million for the financial year ended 30 April 2021, up 14 percent from the previous year. The company’s core business segments all experienced growth. The company forecasts a healthy trading environment in the upcoming financial year. As a result, it expects net revenue growth of 6% to 7%, with gross margins increasing to 53 percent to 54 percent.

DWF Group Plc’s current market cap is £372.53 million, while its current dividend yield stands at 5.24% as of March 2022.

DWF Group stocks have provided huge profits to the investors who purchased its stock in 2021 and it is still shining. Its 52-week stock price high is 130.81 GBX, implying a 14 percent upside objective at the current price of 114.50 GBX.

10. Titan Machinery Inc. (NASDAQ:TITN)

Titan Machinery Inc. operates a chain of stores in the United States that sells agricultural and construction equipment as well as associated machinery.

Titan Machinery Inc. analyst Steve Dyer reaffirmed a ‘Buy’ recommendation on the stock on November 24, boosting the price objective to $40 from $35. According to Dyer, the elements that contributed to the company’s strong Q3 performance and higher FY22 outlook will continue to boost financial outcomes, with profitability, free cash flow, and operating margins expected to rise in the next cycle.

At the end of September, 16 of 867 leading hedge funds disclosed having interests in Titan Machinery Inc., totaling £41.21 million. Rutabaga Capital Management, led by Peter Schliemann, was Titan Machinery Inc.’s largest shareholder at the end of the third quarter, with 177,000 shares worth $5.95 million. Titan Machinery Inc. is a top small-cap company to buy in 2022.

Titan Machinery’s current market cap is £566.85 million. Its 52-week stock price high is $38.58 (£35.13), implying a 39 percent upside objective at the current price of $27.56 (£25.09).

Is Investing in Small-Cap Stocks a Good Idea?

Small-cap stocks are popular among investors because of their potential for growth. Large-cap corporations, such as Coca-Cola, have already cornered global markets and have a little possibility for expansion. Despite the fact that a stock’s price can rise in response to increased sales, large-cap shares rarely see double or triple digit growth.

Small-cap stocks, on the other hand, frequently generate double- and triple-digit yearly returns. These companies sometimes spend years developing a new product, and when it eventually hits the market, the stock price might skyrocket. Small-cap enterprises, on the other hand, can enter new markets and act as disruptors. Small cap stocks are also attractive acquisition candidates for larger corporations, causing share prices to skyrocket.

Small-cap stocks, on the other hand, are significantly riskier than their larger counterparts. If a small-cap company introduces a new product, for example, and it has problems or fails to gain traction, the stock may suffer significantly. Because many small-cap stocks have limited cash flow, business disruptions can put them out of business.

Where to buy the Best Small-Cap Stocks in the UK?

You’ll need a reliable stockbroker to purchase small-cap stocks in the UK. Many brokers with a limited stock selection only allow you to buy shares in larger corporations. As a result, it’s critical to consider what markets your broker has access to and whether you’ll have a large range of small-cap stocks to choose from.

It’s also crucial to consider other elements that will influence your trading. We recommend seeking commission-free brokers. With that in mind, let’s take a deeper look at two of the best UK brokers for buying small-cap stocks right now:

1. eToro 

Large numbers of shares are available for trading on eToro, with over 800 from the United States and several more from the London Stock Exchange. You’ll also have access to over 450 ETFs and growing stock markets in Asia, Africa, and South America, all of which are teeming with new businesses.

Stock CFD trading on eToro is fully commission-free, which is one of the best features of the platform. The broker’s spreads are significantly lower than the industry average, lowering your trading costs. eToro also offers commission-free stock trading for most US stocks. The only additional fees to be aware of on eToro are a £4 withdrawal fee and a £15 inactivity fee that kicks in after a year of inactivity.

eToro has a wealth of trading tools to assist you in locating high-growth small-cap stocks. Every firm has its own page, complete with thorough fundamental data, expert analyst price targets, and very detailed technical charts. Although eToro does not offer a stock screener, you can sort stocks by market.

A social trading network is another important element that this broker offers. You may share ideas with millions of other small-cap investors around the world, making it much easier to locate worthwhile firms. Furthermore, eToro allows you to observe whether investors are buying or selling a specific company’s stock. You may also invest in a basket of companies in seconds by copying the portfolios of skilled small cap traders.

The Financial Conduct Authority (FCA) of the United Kingdom regulates eToro, and accounts are covered by the Financial Services Compensation Scheme. Customer service is available 24 hours a day, seven days a week at the broker.

Pros

  • Trade thousands of equities from the United States and throughout the world
  • Small-cap ETFs are supported
  • Stock CFD trading with no commission
  • Copy portfolios on a social trading network
  • FCA regulates this broker

Cons

  • There is no stock screener
  • Fees for inactivity and small withdrawals

2. Fineco Bank 

This broker is one of Italy’s largest banks, with a trading business that caters to British traders. Fineco, despite not being the most well-known broker in the UK, has a lot to offer.

To begin, you will have access to thousands of shares from the United Kingdom, the United States, and Europe. All stock CFD trades are commission-free, and share trading for UK stocks starts at just £2.95 per trade. Fineco Bank also offers hundreds of exchange-traded funds (ETFs), including a handful of small-cap ETFs. These have a 0.25 percent cost, which for many investors is better than a flat commission.

Fineco Bank’s stock screener is one of our favorite features of utilizing it to invest in small-cap stocks. Fineco’s whole stock offering can be sorted by market capitalization, country, market sector, fundamentals, and recent performance. Even better, you can compare the stocks in your results list using a set of visualization tools to assist you to uncover prospective small-cap investments.

Fineco also provides you with a sophisticated trading platform called PowerDesk. Hundreds of technical indicators and drawing tools are included in this charting program. It’s also very customizable, allowing you to compare two or more small-cap stock charts side by side with ease.

Fineco Bank is considered as reputable since it is an Italian publicly traded company. The Bank of Italy regulates the broker, while the Financial Services Compensation Scheme protects any UK accounts.

Pros

  • You can trade stocks and CFDs without paying a commission
  • There are hundreds of ETFs that charge a 0.25 percent fee
  • A global stock screener is included
  • PowerDesk is a charting program
  • The Bank of Italy is in charge of regulation

Cons

  • Only a small commission for stock trading

How to Buy Small Cap Stocks UK?

Now we’ll walk you through how to buy top small-cap stocks in the UK step by step. If you follow the procedures below, you might have your first small-cap stock in less than 10 minutes. We have chosen eToro, which has a big range of stocks and charges no commission.

Step 1: Open an Account 

To get started, go to the eToro website and click the ‘Join Now’ button. You can sign up for a new account utilizing your Google or Facebook credentials, as well as your email address.

Step 2: Verify Your Identity

eToro asks you to authenticate your identity in order to comply with UK AML rules. Upload a copy of your passport or driver’s license to complete this. You must also provide a recent utility bill or bank statement showing your current residence.

Step 3: Deposit Funds

Credit or debit cards, bank transfers, and e-wallets like Neteller and Skrill are all accepted as payment methods by the broker. When you register a new account with eToro, you must deposit at least £140.

Step 4: Select the Small Cap Stock you want to invest in 

Simply search for the name of the small-cap company you wish to acquire from your account dashboard. To open a new order form, click ‘Trade’ when it appears in the drop-down option.

Step 5: Buy Small-Cap Stock

You’ll now see an order box where you may put the amount of money you want to put into the small-cap stock. You must invest a minimum of £40, but as eToro accepts fractional shares, you can buy any amount over that. You can apply Stop loss or take profit and even leverage for buying small cap stocks on eToro, although this is optional.

Click ‘Open Position’ to acquire your first small-cap stock in the UK once your trade is ready.

Conclusion

Small-cap stocks have a higher growth potential than larger companies, but they also carry a higher risk. If you’re interested in investing in small-cap companies, check out our list of the top ten small-cap stocks for 2022.

If you do decide to invest, eToro now offers all of the best small-cap stocks available for purchase. You can make an immediate deposit using your UK debit/credit card and then acquire AIM shares without paying any commissions.

Frequently Asked Question

What is a small-cap stock?

A company with a market capitalization of $300 million to $2 billion is considered a small-cap company. Small-cap stocks have low stock prices, but this does not indicate whether or not a stock is a small-cap.

Is it possible to invest in small-cap stocks using an ETF?

Many exchange-traded funds (ETFs) specialize in small-cap equities. Some of these funds invest in small-cap equities from throughout the world, while others track the prominent Russell 2000 small-cap index in the United States.

How can I find small-cap stocks using a stock screener?

Setting the market cap filter in a stock screener will help you locate small-cap stocks. You’ll also want to apply other criteria to limit your screen results, such as industry or recent performance.

What is the AIM exchange?

The Alternative Investment Market (AIM) is a London Stock Exchange sub-market in which many small-cap equities are traded. The AIM is a wonderful place to start if you want to invest in UK small-cap stocks.

Are small-cap stocks and penny stocks the same thing?

Small-cap stocks have a market capitalization of $300 million to $2 billion. Penny stocks are those with a share price of less than $5 per share.