Small-cap stocks offer significant growth prospects but are highly volatile, as market fluctuations significantly impact these companies. So, young investors who have a longer investment horizon and greater risk-taking abilities could invest in these companies to earn superior returns. So, if you have higher risk-taking ability, here are three Canadian small-cap stocks that you can buy right now to earn lofty returns in the long run.
Goodfood Market (TSX:FOOD) is an online grocery company that delivers fresh meal solutions and groceries across Canada. The pandemic has brought in some permanent changes to consumer behaviours, such as increased adoption of online shopping, which could benefit Goodfood Market. Given the accessibility and convenience of online shopping, I expect the demand for the company’s services to sustain, even in the post-pandemic world.
Meanwhile, Goodfood Market is broadening its product offerings, increasing the speed of the delivery, and expanding its footprint to capture the expanding markets. Its growing customer base and investment in automation bode well with its growth prospects. Meanwhile, the company has collaborated with Microsoft to develop artificial intelligence projects that could enhance its overall supply chain planning and execution.
However, amid the selloff in the tech space, the company is trading 49.5% lower than its January highs. So, given the company’s high-growth prospects, I believe investors should utilize this correction to accumulate the stock to earn superior returns.
Amid the expanding cannabis market, I have chosen Hexo (TSX:HEXO)(NYSE:HEXO) as my second pick. Although the company’s third-quarter performance was lower than expected, its acquisitions are significant growth drivers. Meanwhile, HEXO completed Zenabis Global’s acquisition earlier this month. This acquisition has made HEXO one of the three top players in the Canadian recreational cannabis market. It provides immediate access to the European medical cannabis market while delivering $20 million in savings within the next year due to synergies.
Meanwhile, HEXO is also working on completing the acquisition of 48North and Redecan, making HEXO the number one licensed producer in the Canadian recreational market. Along with the expansion of its product portfolio, the acquisition could also improve HEXO’s profitability due to Redecan’s lean production capabilities.
The company is expanding its operations in the lucrative U.S. market through a production facility in Colorado. So, the company is well equipped to capture the expanding cannabis market.
Savaria (TSX:SIS) is a $1.26 billion company involved in producing and marketing accessibility solutions. Supported by its solid first-quarter performance and accretive acquisition of Handicare, its stock price has increased by 35.4% this year. However, its valuation still looks attractive, with its forward price-to-sales and forward price-to-earnings multiples standing at 1.8 and 24.7, respectively.
The demand for the company’s services could rise amid the increasing aging population and rising income. Further, Handicare sells its products in 40 countries and earns 89% of its revenue from Europe. So, the acquisition could diversify Savaria’s revenue streams and boost its distribution network outside North America.
The acquisition also provides cross-selling opportunities while improving product innovation and production efficiency. So, the company’s growth prospects are looking healthy. Meanwhile, Savaria also rewards its shareholders with monthly dividends. Its forward dividend yield currently stands at a healthy 2.45%.
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.
Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool owns shares of and recommends Microsoft. The Motley Fool recommends Goodfood Market Corp, HEXO Corp., and Savaria Corp. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.