Turning $5,000 Into $50,000: 2 Small-Cap Stocks With Multibagger Potential

Many investors today are trying to fight what's colloquially known as FOMO, or fear of missing out. Stocks like Micron Technology are up close to 10-fold during the past 12 months, driving the S&P 500 Index to new heights, while leaving many other stocks -- possibly in your portfolio -- in the dust. It is hard to watch others make boatloads of money, but it is in this moment that disciplined, contrarians can make investments that set them up for success through the market cycle.

I would never promise that a stock can go up 10-fold within a year. If anyone tries to sell you this story, run the other way. What you can find are stocks with the potential to deliver multibagger returns over a decade, if you buy at a low price when the business is primed for growth. Here are two small-cap stocks that could turn a $5,000 investment into $50,000 over the course of a decade.

1. Remitly's market share gains

First up is Remitly Global (NASDAQ: RELY). The company, with a market cap of just $4.2 billion, is attacking the global remittance market and gaining market share rapidly. It is doing so by building an easy-to-use mobile application for senders with many pick-up options for recipients around the globe, alongside relatively low fees and new products layered on top.

Remitly's send volume increased 37% year over year last quarter to $22 billion, while revenue rose 25% to $453 million. The company has continued to attract individuals in its core send markets, from the U. S. to Mexico and India, while also expanding rapidly into new areas and offering remittance services for small businesses.

These expansion efforts are broadening Remitly's total addressable market, which should bring revenue growth for years to come. At the same time, Remitly's profit margins and widening, posting a net income margin of 11% last quarter. Combine these two factors with Remitly's small market cap, and the stock has huge multibagger potential.

2. Wix's dirt cheap valuation

Wix (NASDAQ: WIX) is a stock deemed an artificial intelligence (AI) loser in a big way. The company founded its business on no-code website building, which Wall Street believes will be disrupted by the artificial intelligence (AI) models like Anthropic's Claude.

This has not yet shown up in Wix's financial performance. Last quarter, revenue rose 14% year over year to $541 million, with solid growth across all product segments. Importantly, its recent acquisition of Base44 -- an AI-powered mobile app builder -- has just crossed $150 million in annual recurring revenue (ARR). A year ago at this time, Base44 was generating almost no revenue.

It is this explosion in revenue that should have investors thinking Wix is a potential AI winner, not loser. On last year's conference call, management discussed how the company has already trained its own language model for its AI-powered website builder called Wix Harmony, which is seeing increased usage among customers. With a large data set from its long history as a website-building platform, Wix has the opportunity to build the best AI website creation tool as well.

Right now, Wix is not profitable on a GAAP (generally accepted accounting principles) basis due to recent heavy investments in growth, including two major NFL game ads. However, it trades at a market cap of just $2.2 billion, while revenue is $2 billion. If it can keep growing at a double-digit percentage rate and see a recovery in its profit profile as the AI boom matures, Wix stock has great multibagger potential.

RELY Revenue (TTM) data by YCharts

Why do both stocks have multibagger potential?

Finding potential multibagger stocks doesn't require chasing the hottest names like Micron Technology after they have already soared. You want to find stocks with small market caps, a long growth runway, and a low starting valuation.

That describes both Remitly Global and Wix perfectly, and it's why they should make perfect additions to any investor's portfolio today.

Brett Schafer has positions in Remitly Global. The Motley Fool has positions in and recommends Wix.com. The Motley Fool has a disclosure policy.