Small-cap stocks have gotten a bad rap lately, and I get it. Most of them have severely underperformed the broader market rally we’ve seen. Sky-high interest rates have crushed the growth prospects for many of these fledgling companies. And let’s be real. A lot of small-caps are unprofitable anyway, so why even bother investing in them?

Well, I respectfully disagree with that sentiment. Painting all small-cap stocks with the same broad brush is a mistake, in my view. Many of today’s most successful large-cap companies started as small, unknown businesses. If you’re willing to roll up your sleeves and dig into the far reaches of the market, you can uncover some real gems with massive upside potential.

That’s why I’ve compiled this list of three unknown small-cap stocks that I believe are poised for explosive growth over the next few years. The best part? They’re already handsomely profitable. Let’s dive in!

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Propel Holdings (PRLPF)

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Propel Holdings (OTCMKTS:PRLPF) operates an AI-powered online lending platform that provides credit products to underserved consumers. The company has been on a tear lately, with its stock up nearly 200% in less than two years.

Analysts are bullish and expect this momentum to continue, with consensus estimates calling for around 30% annual top-line growth on average going forward. Impressively, Propel is already profitable, posting 47% revenue growth and a strong 13.6% net profit margin in Q1 2024.

However, it’s not all sunshine and rainbows – rising interest rates could pressure margins.

Still, Propel’s results are remarkable for a company with a market cap of under 900 million CAD. With a huge addressable market of 70 million underserved consumers in North America alone, you’d be wise to keep this fast-growing and profitable fintech gem on your radar.

FitLife Brands (FTLF)

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FitLife Brands (NASDAQ:FTLF) has been on an acquisition spree lately, scooping up brands like MusclePharm and Mimi’s Rock to fuel growth.

FTLF stock has risen a staggering 1,000%+ over the past five years — you’d think this must be some cutting-edge AI tech company putting up those kinds of gains! But no, FitLife is in the decidedly unsexy supplements business. It just goes to show that you should never underestimate a boring but profitable industry.

Supplements are booming as health-conscious consumers look for any edge and are willing to pay for premium products. FitLife is cashing in, sporting strong margins and $16.5 million in revenue in Q1, up 54%. Yet the market cap is a modest $147 million, leaving plenty of room for this uptrend to continue.