As small-cap stocks have a higher potential for growth than the bigger rivals, using a Tax-free Savings Account (TFSA) to invest in them would be a smarter move, as capital gains in a TFSA are not taxed.
Further, with the expected recovery in demand and economic expansion, now is the time to invest in small-cap stocks for outsized growth.
Jamieson Wellness (TSX:JWEL) has consistently performed well over the past several years and delivered strong organic growth. Its organic sales have grown at a CAGR (compound annual growth rate) of 8.9% since 2013, thanks to its strong product portfolio, sectoral tailwinds, and geographic expansion.
Meanwhile, acquisitions of established brands further bolstered its top- and bottom-line growth.
Jamieson Wellness’s top line has grown at a healthy pace over the past several years. Further, its adjusted EBITDA and free cash flows marked double-digit growth.
I believe the company could continue to deliver strong financial performance on the back of rising demand for protein and wellness products. Its strong brand affinity, advancements in China, and expansion of distribution channels position it well to deliver double-digit sales and earnings growth.
Jamieson Wellness’s increased investments in manufacturing facilities are likely to boost its production capacity, which should drive its market share in domestic and international markets and accelerate its growth. Meanwhile, opportunistic acquisitions are likely to bolster its growth further and support the uptrend in its stock. The company has raised its dividends for three consecutive years and offers a decent yield of 1.2%.
The lender to the non-prime borrowers, goeasy (TSX:GSY), is another top small-cap company that should be on your radar. goeasy has impressed with its operational performance over the past two decades and delivered strong double-digit revenues and earnings growth. Thanks to its high-quality earnings base, goeasy has also boosted its shareholders’ returns through consistent dividend payments. While it has paid dividends for 16 years, it has raised the same in the past six consecutive years.
I believe the improvement in consumer demand and economic recovery could boost its loan portfolio and support its growth. The company expects the demand for credit to revive and projects a 5-6% improvement in its loan portfolio in Q4.
Further, its new product launches, channel expansion, and productivity and cost-saving measures are likely to drive revenues and earnings in the coming quarters.
Real Matters (TSX:REAL) is expected to benefit from the lower interest rate environment, which is likely to fuel mortgage refinancing volumes. Despite the secular industry trends and market share gains, Real Matters stock has witnessed heavy selling over the past several months, as its growth rate decelerated on a sequential basis.
Real Matters stock has lost over 43% in value since August 2020, which provides a strong entry point for long-term investors.
I believe the interest rates could remain low for an extended period, which should act as a key growth catalyst for Real Matter stock. Further, a large addressable market, new customer acquisitions, and the blue-chip client base provide a strong underpinning for growth.
I believe vaccine distribution could accelerate economic recovery and fuel corporate earnings growth, which provides a solid growth opportunity for these small-cap companies. Meanwhile, these companies have performed well over the past several years and have strong fundamentals that could support the uptrend in their stocks.
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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Real Matters Inc.