3 Small-Cap TSX Stocks to Buy for Outsized Gains

Three TSX stocks offer handsome growth for 2023.

| More on:
analyze data

Image source: Getty Images

One can’t ask for market-beating returns from a defensive name. You have to take higher risks to achieve higher returns. Small-cap names offer high-risk/higher-reward proposition, as they generally outperform their larger counterparts in a bull market. So, here are three such TSX stocks that offer superior growth prospects.

Precision Drilling

Oilfield services stock Precision Drilling (TSX:PD) looks well positioned for 2023 after a massive run last year. It returned 105% in 2022, notably beating its peers.

As oil and gas production companies are sitting on record profits, their expenditures for digging have also gone up. As a result, companies like Precision Drilling have seen greater business opportunities and superior revenue growth.

In the last 12 months, Precision Drilling saw its revenues jump over 40% year over year to $1.4 billion. The company is still a loss-making venture. However, it repaid $100 million of debt last year, overachieving its target of $75 million.

Drilling activity is expected to rise in 2023 amid the golden days of the industry. Its free cash flow is expected to more than double this year compared to 2022, which will likely fuel its share-repurchase program, ultimately creating considerable shareholder value.

Cineplex                                                                            

One key reason for being bullish on Cineplex (TSX:CGX) stock is its recent correction. The stock has lost 40% in the last 12 months and looks appealing from a valuation standpoint.

Cineplex posted comfortable profits for the third quarter of 2023, a rare and much-awaited feat for its investors. It saw an overall handsome performance in the third quarter (Q3), as moviegoers flocked to big screens amid blockbuster releases. The trend could continue in Q4 2022 amid the holiday season. Consistent financial growth will be key for its stock. Cineplex plans to release its Q4 2022 earnings by the middle of next month.

CGX had total debt of $1.9 billion at the end of Q3 2022. Almost 54% of this debt is capital leases and the rest is long-term debt. So, its balance sheet position and leverage do not look that concerning at the moment. Plus, if it receives Cineworld settlement in full, it could substantially improve its balance sheet. Notably, this has not been priced in the stock yet due to associated uncertainties.

goeasy

Consumer lender stock goeasy (TSX:GSY) is another growth name that has created massive shareholder wealth in the past. It lends to non-prime borrowers and caters to large addressable markets.

Despite being in a risky industry, goeasy has consistently seen industry-leading financial growth for the last several years. Its return on equity averaged around 26.3% in the last five years, and the stock has returned more than 200% in the same period.

GSY’s omnichannel presence, robust underwriting, and fitting product range played out well for its business growth. Its strong execution will likely continue to create value for shareholders going forward.

GSY stock has dropped 32% in the last 12 months. Such a steep correction makes it an attractive name for discerned investors.   

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.

The Motley Fool recommends Cineplex. The Motley Fool has a disclosure policy. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

More on Investing

Canadian dollars are printed
Dividend Stocks

This 5.5% Dividend Stock Is a Cash Flow Machine

Are you worried about the future? Worry no more with this top dividend stock.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

I’d Put My Entire TFSA Into This 5.8% Dividend All-Star

If you're looking at a place to pop your TFSA contribution, stop right now and consider this dividend all-star.

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

A 4.9% Dividend Stock Paying Cash Every Single Month

Do you need cash on a regular basis? Then pick up this one while it's still a great price.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Wednesday, July 16

After a sharp pullback from record highs, the TSX may struggle for direction today as investors await U.S. wholesale price…

Read more »

Person uses a tablet in a blurred warehouse as background
Tech Stocks

1 Magnificent AI Stock Down 21% That Could Transform Your Portfolio

If you’re looking for a practical AI stock with strong fundamentals and untapped potential, Descartes might be the one to…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Stocks for Beginners

I’d Put All My $7,000 TFSA Contribution Into This Dividend Stock Right Now

If I'm looking to make some extra cash, then this dividend stock is my first stop.

Read more »

oil pump jack under night sky
Energy Stocks

Baytex Energy: Buy, Sell, or Hold in July 2025?

Baytex picked up a new tailwind in recent weeks. Are more gains on the way?

Read more »

Woman checking her computer and holding coffee cup
Energy Stocks

Whitecap Resources: Buy, Sell, or Hold in July 2025?

Depending on your risk tolerance and the size of your position to your portfolio, Whitecap Resources could be a buy,…

Read more »