My favourite type of growth stocks are those with small market capitalisations and big futures. This combination usually means the business has a long growth runway that should translate into a lot of growth for the share price.
Finding a growth stock isn't as easy as just picking a small business and hoping for the best. It needs to be in the right industry with strong signs that it's currently growing and will continue to in the future.
Here are two small-cap stocks with big futures:
Freelancer Ltd (ASX: FLN)
Freelancer is a $515 million project portal business that connects freelancers and clients needing a service.
The projects could be as simple as asking for a graphic designer to design a logo, or a complex project such as designing multiple excel spreadsheets. The complexity of the task dictates the price and Freelancer takes a fee.
With the rising use of the internet, the portal is used by people all around the world, meaning the number of potential projects is huge and the prices are very competitive.
In the first half of the 2016 year Freelancer grew its revenue by 56%. Freelancer also has an online escrow service which is number one for secure online payments in the USA. This service grew revenue by 20% in 2015.
Freelancer isn't yet making a profit and doesn't pay a dividend.
Amaysim Australia Ltd (ASX: AYS)
Amaysim is one of the second tier telcos with a market capitalisation of $371 million. It provides mobile phone data plans at much cheaper prices than its larger competitors such as Telstra Corporation Ltd (ASX: TLS), and is just starting to offer NBN plans.
Mobile phone usage continues to grow and consumers are always on the lookout to get a bargain deal. Amaysim's strategy saw it grow revenue by 19% and gross profit by 43.5% in FY16. This best-value strategy could see it steadily take market share over the coming years.
It has to pay Optus a fee to use its network, but this means Amaysim doesn't have to set up all the infrastructure or maintain it. Arguably, Amaysim is getting the better end of the deal.
Amaysim is trading at 30x FY16's earnings with a dividend yield of 4.15%.
Foolish takeaway
I think both stocks will have good performances over the next 24 months and would make good additions to a Foolish portfolio, but I'd choose Freelancer as my pick for its global opportunities.
