3 Small-Cap Stocks With Huge Growth Potential

Given their solid growth potential and attractive valuations, these three small-cap stocks would be excellent buys for long-term investors.

| More on:

Small-cap companies have their market capitalization between $300 million and $2 billion. These companies possess higher-growth potential and have the potential to deliver solid returns in the long run. However, these companies can be highly volatile and vulnerable to market volatility. So, given their volatile nature, investors with higher risk-taking abilities can invest in them. Meanwhile, here are my three top picks.

goeasy

goeasy (TSX:GSY), which provides leasing and lending services to sub-prime customers, is my first pick. It has grown its financials at a healthy rate over the last 20 years, with its adjusted net income growing at a CAGR of 31%. Despite its impressive growth, the company has acquired just 3% of its addressable market, thus providing a substantial growth potential.

With the improvement in economic activities amid the easing of COVID-related restrictions, loan originations have increased, benefiting goeasy. Meanwhile, the company is focusing on strengthening its omnichannel lending services, venturing into new markets, increasing its penetration in key geographic markets, and improving customer experience to expand its market share.

Notably, the company has set optimistic guidance for the next three years, with its loan portfolio projected to grow 67% to reach $3.6 billion by 2026.

Despite its healthy growth potential, goeasy trades at an attractive NTM price-to-earnings multiple of 7.9. It is also growing its dividend at a CAGR of 34% since 2014. Considering all these factors, I am bullish on goeasy.

WELL Health Technologies

WELL Health Technologies (TSX:WELL) is a digital healthcare company that facilitates healthcare professionals in providing omnichannel solutions. Meanwhile, given their convenience and accessibility, telehealthcare services are becoming popular, thus driving the demand for the company’s services.

Meanwhile, WELL Health had recently announced to ramp up its M&A activities. Last month, it signed an agreement to acquire INLIV, a premium omnichannel primary care provider. The acquisition could allow the company to expand its footprint in Alberta. Additionally, the company has strengthened its presence in the United States by acquiring Circle Medical and Wisp. The combined revenue from both companies has crossed $110 million in annualized run rate. So, its growth prospects look healthy.

However, amid the weakness in growth stocks, WELL Health has lost around 65% of its stock value compared to its 52-week highs. The correction has dragged its NTM price-to-earnings multiple down to an attractive 14.5. So, given its high-growth prospects and attractive valuation, I expect WELL Health to deliver multi-fold returns in the long run.

Docebo

Docebo (TSX:DCBO)(NASDAQ:DCBO), which offers corporate e-learning solutions, is my final pick. Amid the increased adoption of hybrid work culture and remote learning, the demand for e-learning solutions is rising. Meanwhile, Fosway Group projects the LMS (learning management system) market to grow at a CAGR of 21% from 2019 to 2025.

Docebo’s growing customer base, increasing average contract value, and multi-year agreements with clients could support its growth in the coming years. Meanwhile, it also earns over 90% of its revenue from recurring sources, which is encouraging. Despite its healthy growth potential, Docebo has lost over 65% of its stock value compared to its 52-week high. So, given its high growth potential, I believe investors should utilize the steep pullback to accumulate the stock to earn solid returns over the next 10 years.

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 Docebo Inc. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.

More on Investing

Hourglass and stock price chart
Dividend Stocks

5.2% Dividend Yield! I’m Buying This TSX Stock and Holding for Decades!

With its 5.2% dividend yield, Toronto-Dominion Bank (TSX:TD) is a stock I'm eagerly buying.

Read more »

Man looks stunned about something
Dividend Stocks

Better Long-Term Buy: Dollarama Stock or Canadian Tire?

Both of these Canadian stocks have proven to be solid long-term buys, but which is better for the average investor?

Read more »

how to save money
Investing

The Best TSX Stock for Canadians to Buy With $1,000 Right Now

iShares S&P/TSX 60 Index ETF (TSX:XIU) could be a great starter investment for new investors in Canada.

Read more »

Canadian dollars are printed
Dividend Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Toronto-Dominion Bank (TSX:TD) stock could do well in the year ahead.

Read more »

monthly desk calendar
Dividend Stocks

Monthly Income: Top Dividend Stocks to Buy in November

Here are two of the best monthly dividend stocks in Canada you can buy in November 2024 and hold for…

Read more »

hand stacks coins
Investing

A Top TSX Stock to Buy Now for Real Wealth Later

Intact Financial (TSX:IFC) stock is a fantastic dividend-growth play for the next 15 years and beyond.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, November 14

The U.S. wholesale inflation data and Fed chair Jerome Powell’s remarks about the economy will remain on TSX investors’ radar…

Read more »

Man data analyze
Tech Stocks

3 Reasons Celestica Stock Is a Screaming Buy Now

These three reasons make Celestica stock a screaming buy for long-term investors.

Read more »