3 Small-Cap Stocks Under $20 That Can Make You Rich

Given their large addressable markets, these three small-cap stocks can deliver impressive returns over the long run.

| More on:

After falling 2.4% last month, the S&P/TSX Composite Index has made a strong start to this month by rising 1.8%. The hopes of a breakthrough in the new fiscal stimulus in the United States and the improvement in the health of President Donald Trump has driven the equity markets higher.

Amid the renewed optimism, here are the three small-cap stocks trading under $20 that can deliver multi-fold returns in the long run. Generally, small-cap stocks are highly volatile and riskier. So, investors with higher risk-taking abilities should consider investing in these stocks.

Absolute Software

Absolute Software (TSX:ABT), which provides endpoint security and data risk-management solutions, has returned over 88% this year. Amid the structural shift towards remote working and e-learning, the demand for cybersecurity services has increased, driving its financials and stock price.

The company currently services over 13,000 clients, with over nine million activated licences across the world. It earns 95% of its revenue from its SaaS (software-as-a-service) business, which is recurring. So, the company’s cash flows are stable.

Further, the company’s annual recurring revenue (ARR), an indicator of its future recurring revenue streams, has been rising over the last few quarters. At the end of the recently completed fourth quarter, the company’s ARR stood at $108.3 million, representing an increase of 11% from the previous year’s quarter.

Gartner projects the spending on cybersecurity to reach US$190 billion by 2023, with US$56 billion dedicated to endpoint security technology. So, given its growing addressable market, high customer retention rate, and zero-debt balance sheet, I am bullish on Absolute Software. Also, the company pays quarterly dividends. Currently, the dividend yield stands at a healthy 2%.

Goodfood Market

My second pick would be an online grocery and meal-kit company, Goodfood Market (TSX:FOOD), which has returned over 520% from its March lows. The pandemic has led to an increased subscriber base, higher orders, and a rise in average order values, driving its financials.

As of August 31, the company had 280,000 active subscribers, representing a rise of 80,000 from the previous year. Meanwhile, the expansion of its ready-to-eat and breakfast meal solutions and private label grocery products across Canada has also contributed to its top-line growth.

In the first three quarters of 2020, Goodfood Market‘s revenue has increased by 74% to $201.7 million. Its adjusted EBITDA losses have also improved from $11.8 million to $0.6 million. The sales leverage, operational efficiencies, investment in automation, and lower SG&A (selling, general, and administrative) expenses have led to a decline in its adjusted EBITDA losses.

Meanwhile, the shift in consumer behaviour towards online shopping amid the pandemic has created a long-term tailwind for the company, supporting the upward momentum in its stock price. So, I believe the rally in the company’s stock price has more legs to go.

Facedrive

Facedrive (TSXV:FD) is a ride-hailing company that offers greener options, such as electric and hybrid vehicles, to its customers, along with conventional cars. The company’s eco-friendly positioning has been gaining traction with millennials, driving its top line.

Further, the company looks to expand its operations to Europe and the United States also. Given the global market size of the TaaS (transportation-as-a-service) business, the company has significant expansion potential. The company is also diversifying its operations to other sectors, such as e-commerce, food delivery, and healthcare businesses. So, the company’s growth prospects look healthy.

Currently, the company trades at a 56% discount from its 52-week high of $28, which provides an excellent entry point for long-term investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Goodfood Market. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.

More on Tech Stocks

profit rises over time
Tech Stocks

4 Reasons to Buy Constellation Software Stock Like There’s No Tomorrow

Constellation Software stock continued its climb upwards after recent earnings, and this only adds to its appeal.

Read more »

calculate and analyze stock
Tech Stocks

1 Stock That’s Just as Hot as Nvidia (Without All the Hype)

Nvidia stock may look like a strong option, but its valuation is through the roof. Enter this other under-the-radar stock.

Read more »

A plant grows from coins.
Tech Stocks

3 Growth Stocks Wall Street Might Be Sleeping on, But I’m Not

Don’t miss your chance to load up on these three beaten-down stocks.

Read more »

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

Why Now Is the Time to Invest in Canadian AI Stocks

Are you looking for one of the most solid Canadian AI stocks out there? This one is probably your best…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Why AI Stocks Should Be in Every Canadian Investor’s Portfolio

AI stocks continue to be one of the best options out there for long-term investing, especially when considering Canadian options.

Read more »

money goes up and down in balance
Tech Stocks

1 “Magnificent 7” Stock I’d Buy Over Nvidia Right Now

Here's why Meta Platforms stock is a better choice for Canadian investors compared to Nvidia in November 2024.

Read more »

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

Read more »