5 Small-Cap Security Stocks to Generate Earnings


Businesses and homes will need security services as long as there is crime. As people grow more concerned over their safety, and criminals grow more sophisticated, investing in security companies can prove profitable. With emerging tech changing the safety landscape, small-cap stocks in this area may be particularly enticing.

The need for physical and digital security has never been more evident. Cybercrime exploded amid the COVID-19 pandemic, with ransomware attacks at least doubling since January 2020. Widespread civil unrest has also made many businesses and homeowners concerned about break-ins and property damage.

Given these rising trends, it may be an ideal time to invest in security. Here are five small-cap security stocks you may want to consider.

1. VirnetX Holding Corp. (NYSE: VHC)

VirnetX Holding Corp. is a communications security company developing cybersecurity solutions for things like instant messaging. Since 88% of global organizations encouraged or required remote work in 2020, secure communication is more crucial than ever. Security platforms like those from VirnetX are going to see rising demand.

VirnetX also has one of the lowest price-to-earnings ratios of any small-cap company right now. It’s a promising investment at just above $5 a share and a steady year-over-year growth rate.

2. A10 Networks Inc. (NYSE: ATEN)

Whereas VirnetX focuses on communication security software, A10 Networks takes a broader approach. The company offers everything from hardware to cloud-based security to firewalls. As businesses shifted their workflows and needed new cybersecurity solutions, this diversified list of offerings saw high demand.

By the middle of 2020, A10’s price returns had grown 17.4%, compared to just 1.7% in the industry as a whole. The company has continued to show steady growth throughout the year since. It may be worth investing in while it’s still a small-cap stock.

3. Ribbon Communications Inc. (NASDAQ: RBBN)

One of the newest companies on this list is Ribbon Communications, which came onto the scene in 2017. Ribbon provides secure software solutions to telecommunications companies, helping enterprises design or expand their services safely. Given the emergence of 5G networks this year, this could be a rising demand for cybersecurity.

As more people started working from home, Ribbon saw robust demand for their communications solutions. Their Q2 2020 revenue grew 45% over their figures for 2019, and with more 5G networks rolling out, they’re in an ideal position to grow even more. 

4. Arlo Technologies, Inc. (NYSE: ARLO)

Cybersecurity may have enjoyed time in the spotlight this year, but it’s not the only in-demand safety sector. Physical security is also growing, and Arlo is one of the leading small-cap stocks in that area. Arlo has become something of a benchmark for smart security cameras and sensors.

Arlo’s security suite offers a range of reliable wireless technologies, letting users check cameras and sensors from their phones. As these devices have become more in-demand, Arlo’s stock prices saw a more than 100% year-to-date growth so far.

5. Monitronics International, Inc. (OTCQX: SCTY)

Rounding off this list is Monitronics International, which does business as Brinks Home Security. Like Arlo, this is a home security company, but with a more diversified product suite. On top of cameras and sensors, they offer thermostat integration, garage door lock and flood sensing systems.

That last offering is particularly valuable, since water damage claims cost more than $10,000 on average. While Brinks’ growth hasn’t been as explosive as some others, it has steadily increased for the past five years, making it a safer bet.

Things Look Promising for Security Small-Cap Stocks

These small-cap stocks are just a small sampling of the opportunities that exist. Whether it’s physical or digital, security is a vital concern for individuals and businesses alike. As a result, this market will grow, and these stocks will become more profitable.

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