3 Incredible “Mighty Mouse” Stocks to Buy Right Now

Tired of sluggish results? This trio of small-cap stocks, including Park Lawn (TSX:PLC), might provide the explosive upside you’re looking for.

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Hi there, Fools. I’m back once again to feature three attractive stocks with market caps below $1.5 billion — or, as I like to call them, my top “Mighty Mouse” plays.

For inquiring minds, I do this because small-cap stocks have much more upside than more established large-cap companies; are underfollowed by Bay Street analysts; and can provide tremendous diversification benefits.

While small-cap stocks tend to display higher levels of volatility, a few well-selected winners can be life-changing.

So, without further ado, let’s get to this week’s mighty mouse plays.

Absolutely attractive

Leading things off is Absolute Software (TSX:ABT), which currently sports a market cap of $315 million. Year-to-date, shares of the security software specialist are up 17% versus a gain of 15% for the S&P/TSX Capped Information Technology Index.

Absolute has more than 12,000 customers worldwide, and that count should only keep growing. In its Q1 results released yesterday, total revenue increased 6% to $24.3 million, with the company’s annual contract value base growing 5% to $93.1 million. Adjusted operating margins also expanded significantly.

Absolute paid a quarterly dividend of $0.08 during the quarter. At the current price, that translates into a solid 4.3% yield — pretty rare for a small-cap tech stock.

Death-care dynamo

Next up, we have Park Lawn Corp. (TSX:PLC), which has a market cap of $540 million. Shares of the funeral and cemetery provider are up 16% over the past year, while the S&P/TSX Composite Index is down 5% during the same time frame.

No business is completely recession proof, but death-care comes pretty close. Park Lawn’s revenue, income, and operating cash flow have grown 804%, 722%, and 100%, respectively, over the past five years. Moreover, management has doled out a dividend each month since January 2011.

Right now, the stock yields a fairly attractive 2.0%. Combine that with comforting beta of 0.4, and Park Lawn’s downside seems limited.

DIRTT(y) money

Closing things out is DIRTT Environmental Solutions (TSX:DRT), which sports a market cap of $600 million. Over the past six months, shares of the interior construction company are up 11% versus a gain of 4% for the S&P/TSX Capped Industrials Index.

The stock surged last week on strong Q3 results. During the quarter, adjusted operating income surged 65% as revenue increased 15% to $96.6 million. More important, operating margin expanded 560 basis points, suggesting that management remains fiscally disciplined even amid rapid growth.

With a beta of 2.2, DIRTT shares are more than two-times as volatile as the overall market. But as long as you can stomach the stress, DIRTT’s long-term upside is quite attractive.

The Foolish bottom line

There you have it, Fools: three small-cap stocks with the potential to deliver big returns.

Of course, they aren’t formal recommendations. Instead, look at them as a jump-off point for further due diligence. Smaller companies usually come with a higher level of risk, so it’s extra-critical to do your homework.

Fool on.

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.

Brian Pacampara owns no position in any of the companies mentioned.   

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