Canadians with investment appetites but limited capital have two profitable buying opportunities this year end. InPlay Oil (TSX:IPO) and 5N Plus (TSX:VNP) are market-beating stocks trading for less than $3. Market analysts covering the small-cap stocks are bullish and have buy recommendations for both.
A dividend-growth stock in the making
Energy remains the top-performing sector as of mid-December 2022. It beats the TSX by a wide margin year to date at +46.05% versus -7.64%. InPlay Oil isn’t as popular as other energy stocks, but it’s up 36.16% thus far this year. Also, at only $2.94 per share, the total return in 3.01 years is 343.01%, or a compound annual growth rate (CAGR) of 64.02%.
Market analysts’ 12-month average price target for IPO is $6.75 — a 129.6% return potential. Since the board of directors recently approved a $0.15 monthly cash dividend, the overall return in one year could be higher. Also, management said that it’s the inaugural dividend base of InPlay.
This $256.22 million junior oil and gas exploration and production company operates in Alberta and focuses on light oil production. It boasts long-lasting, low-decline properties with high drilling development and enhanced oil recovery potential. InPlay can also pursue exploration possibilities in underdeveloped lands.
Like most energy players, InPlay has had record-setting financial and operating results this year. In the third quarter (Q3) of 2022, comprehensive net income climbed 85.2% to $15.35 million versus Q3 2021. The average quarterly production increased 58% year over year to 9,495 barrels of oil equivalent per day (boe/d) — a new company record.
In the nine months that ended September 30, 2022, free adjusted funds flow soared 1,333.4 % to $36.58 million compared to the same period in 2021. At the end of Q3 2022, InPlay’s net debt is down 36% to $45.6 million versus the same quarter last year.
Because management remains upbeat about future commodity prices, it expects the strong operational results to continue. InPlay commits to providing top-tier production per-share growth and a return of capital to shareholders. Moreover, the energy stock is well positioned to deliver meaningful returns to shareholders over the long term through the base dividend and share-buyback program.
Niche: Fast-growing markets
5N Plus supplies specialty metals, alloys, and related chemicals globally. The products of this $223.5 million company are vital components in various consumer and industrial products. At $2.53 per share, the year-to-date gain and trailing one-year price return are 6.3% and 15.53%, respectively.
By deploying proprietary and proven technologies to meet customer demand and specifications, 5N hopes to secure long-term sourcing contracts with primary producers. It also offers value-added services like cradle-to-cradle recycling and research and development partnerships.
While the net loss in Q3 2022 widened nearly 750% to US$7 million versus Q3 2021, revenue rose 30.6% to US$66.37 million. Still, management said 5N has a built-in advantage and is well positioned in fast‐growing markets. Double-digit growth rates should sustain in the coming years.
Price friendly
InPlay Oil and 5N Plus are exciting, price-friendly stocks that can deliver massive gains in the near term. The former is an upcoming dividend-growth stock with strong upside potential. Meanwhile, the latter is scratching the surface but should eventually realize its full potential by growing its captured markets.
