1 Stock Under $3 That Could Make You a Substantial Amount of Wealth

Why StorageVault Canada Inc. (TSXV:SVI) may be the best growth stock that you’ve never heard of!

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Before I get to the stock featured in this piece, a word of warning for new investors:

Just because shares of a company have a low stock price doesn’t mean they’re undervalued or cheap. By itself, the price of a share tells you nothing useful about the intrinsic value of a security.

A single-digit stock price can lead you in the direction of promising high-growth small- to mid-cap stocks, however. These small-cap stocks are less “market efficient” than their mega-cap peers, essentially allowing you a higher chance of scoring excess risk-adjusted returns (or alpha) on your investment.

Be careful, though, because there are a lot of “disgusting” penny stocks below $3, and to avoid them, a rule of thumb I use is only to purchase shares of a company with a market cap that’s greater than $100 million. That shuts the door on most of the ugliest penny stocks that could lead you in a heap of trouble.

With that warning out of the way, enter StorageVault Canada (TSXV:SVI), a name that both fellow Fool contributor Will Ashworth and I believe is “the best stock on the TSX Venture Exchange.” The fast-growing self-storage player has a market cap that’s just north of $1 billion at the time of writing and could very well be a name that could graduate to the TSX at some point soon.

The business of self-storage may seem boring, but the given the rate of growth of the company, and the industry-wide tailwinds (well covered in a prior piece), StorageVault is a fantastic under-the-radar play for growth-oriented investors who want a company that could evolve into a market darling.

At $2.83 per share, StorageVault may seem like a “cheap” stock, but it’s actually reasonably pricey (10 times sales and 40.4 times cash flow) given the fact that StorageVault is a growth play that’s clocked in very high double-digit top-line numbers over the past few years thanks in part to consistent acquisitions in Canada’s self-storage scene.

Given the stable nature of the self-storage market (it’s essentially a REIT for your “stuff”), I see a scenario where the company can safely lever up and give its growth a jolt as it pursues further acquisitions in the space. Indeed, StorageVault is a weird play. It’s easy to understand, but, most importantly, it has a high growth ceiling and a lower-risk growth story compared to many other mid-cap firms growing their revenues at the same magnitude.

While the stock has been consolidating for well over three years, the name could be ready to pop like a coiled spring at some point over the next three years as management continues to fire on all cylinders.

Stay hungry. Stay Foolish.

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.

Fool contributor Joey Frenette has no position in any of the stocks mentioned.

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