Hello, Fools. I’m back to highlight three attractive small-cap stocks. As a reminder, I do this because companies with a market cap under $2 billion have much more room to grow than larger more established “blue chips” and are largely ignored by professional analysts.
If you want to turn an average $27K TFSA into a million bucks in 20 years, you’ll need an annual return of at least 20% to do it. So while small-cap stocks tend to be on the volatile side, the upside return potential is often well worth the risk.
Without further ado, let’s get to it.
Walk the wire
Sierra is widely considered a leading play on the “Internet of Things” (IoT), but recent losses have weighed on the stock. In the most recent quarter, Sierra posted a loss of $0.9 million as revenue dropped 7% to $173.8 million.
On the bright side, IoT Solutions revenue improved 5.4% while the company’s cash hoard stood a $74.1 million at quarter’s end, suggesting that Sierra remains relatively healthy.
“We are making good progress driving improved efficiency throughout our operations to accelerate our transformation into a leading global IoT solutions provider,” said President and CEO Kent Thexton.
Sierra shares are down 21% over the past year.
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The company has underperformed due to issues at its key Westwood mine, but now might be a good opportunity to pounce. While Q1 sales fell 19% year-over-year, management maintained its full-year production guidance of 810K-870K attributable ounces and all-in sustaining costs of $1,030-$1,080 per ounce sold.
Moreover, rumors continue to swirl that management is exploring a potential sale of all or part of the company, providing some juicy short-term upside to the shares.
“Despite a challenging first quarter, we are driving towards achieving a self-funded, self-sustaining operating model,” said President and CEO Steve Letwin.
IAMGOLD shares are down a significant 52% over the past year.
Rounding out our list is steel company Russel Metals (TSX:RUS), which currently has a market cap of $1.3 billion.
The stock has been pressured over the past year on trade-related uncertainty with the U.S., but things are starting to look brighter for Russel.
First, steel tariffs have been lifted. And second, operations seem to be humming. In Q1, EPS of $0.55 topped expectations by $0.11, revenue increased 10.6% to $1.03 billion, and free cash flow clocked in at $58 million.
“We are pleased with the solid results achieved during the first quarter of 2019 and want to commend our team for their efforts in a tightening market,” said President and CEO John Reid.
Russel shares are off 24% over the past year.
The bottom line
There you have it, Fools: three attractive mighty mouse stocks worth checking out.
As always, they aren’t formal recommendations. Instead, view them as a starting point for more research. Small-caps carry more risk than the average stock on the TSX Index, so extra caution is required.
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 Brian Pacampara owns no position in any of the companies mentioned. David Gardner owns shares of Sierra Wireless. The Motley Fool owns shares of Sierra Wireless.