Hi there, Fools. I’m back again 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-dollar retirement hoard 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.
If you’re looking to get your 2020 off to a hot start, this is a good place to begin looking.
Tooling around
Kicking off our list is ATS Automation Tooling Systems, which currently sports a market cap of $1.8 billion. Shares of the factory automation specialist are up about 19% over the past year.
ATS’s firm competitive position in the automation space, solid scale (23 manufacturing facilities in North America, Europe, and Asia), and strong industry trends should continue to drive impressive long-term returns.
In the most recent quarter, EPS nearly doubled to $0.21 on revenue growth of 20%.
“Operationally, our team has executed well in delivering value to customers and driving continuous improvement in operations through our ATS Business Model,” said CEO Andrew Hider.
ATS shares trade at a forward P/E of 21.
Hitting a wall
With a market cap of $1 billion, Wall Financial is our next small-cap marvel. Shares of the real estate development company are up 18% over the past year.
The stock’s long-term potential is underpinned by Wall’s high-quality portfolio (1,400 commercial/residential units and 934 hotel units), stable fundamentals, and strong management team. Over the past year, Wall has grown its EPS, operating cash flow, and revenue at a rate of 192%, 126%, and 25%, respectively.
As my Foolish colleague Christopher Liew stated last month, “you can lean on Wall if it can sustain its exemplary performance. You might just be looking at one of the top real estate stocks in 2020.”
Wall currently boasts a juicy dividend yield of 9.8%.
Parting ways
Rounding out our list is Martinrea International, which sports a market cap of $1 billion. Over the past year, shares of the auto parts company are up 19%.
Martinrea’s leading position in the metal auto parts space, global reach (52 locations worldwide), and positive industry tailwinds (popularity of SUVs and lightweight vehicles) should continue to fuel impressive long-term growth. In the most recent quarter, Martinrea posted record Q3 EPS of $0.56 as revenue improved 14.5% to $974.4 million.
“Looking forward, we anticipate a strong 2020, with increased production sales and future growth beyond that,” said Chairman Rob Wildeboer. “The industry has been seeing some challenges, but we believe we are seeing some positive signs for our industry.”
Martinrea offers a dividend yield of 1.5%.
The bottom line
There you have it, Fools: three attractive small-cap 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.
Fool on.
