2 Canadian Small Caps to Keep Your Eye on

Cargojet (TSX:CJT) and another mid-cap stock could help Canadian investors get a better value for their buck this February.

| More on:
Man holding magnifying glass over a document

Image source: Getty Images.

Small-cap investing can be tricky, with greater volatility (on average) than most blue-chip stocks that most Canadians flock to. Though small-cap stocks may seem riskier, they can be sources of greater returns over the long haul, especially for the lesser-known small caps that few pay attention to. Indeed, it’s much easier to grow as a $500 million company than as a $ 500 billion company!

Further, small- and mid-cap stocks tend to trade at a greater discrepancy to its intrinsic value. In essence, Mr. Market isn’t as efficient in pricing smaller-cap stocks at their true worth. This opens up a window of opportunity for venturesome investors who seek to get a bit more bang for their investment buck.

With market volatility returning to Wall Street just in time for the spring, investors may wish to give the neglected small caps a second look while they experience considerable volatility. At the end of the day, small-cap stocks can help give your portfolio a bit of a jolt. But do be mindful of the price you’ll pay and do know that mid-cap stocks can trade at multiples below their intrinsic value range for quite some time. Indeed, investors will need to be incredibly patient with the neglected small caps.

Without further ado, consider the following two Canadian small caps that I’d look to watch going into March 2023. The following smaller-cap stocks are among my favourite names with market caps south of $2.5 billion.

Park Lawn

Park Lawn (TSX:PLC) is a deathcare company that’s grown impressively over the years, thanks in part to smart merger and acquisition moves. Over the past year, shares have sagged considerably, now down around 23% over the past year alone. Shares are off just north of 34% from their all-time highs.

Undoubtedly, recessions can weigh heavily on before-need demand. Though Park Lawn is feeling the macro headwinds, it isn’t the only one in the space that’s felt the pressure. Amid the past year of selling pressure, the firm has been making good use of its balance sheet, acquiring firms like Jacoby and Muehlebach, enhancing the firm’s growing portfolio of deathcare assets.

It’s unclear when industry pressures will fade. Regardless, the stock seems undervalued at 26.8 times trailing price to earnings (P/E). Death care may not be an exciting place to invest, but as a provider of necessary services, Park Lawn is a name that will find its footing again as the environment normalizes.


Cargojet (TSX:CJT) is a mid-cap stock that used to be loved by momentum investors. The cargo airline used to be a compelling way to play the rise in e-commerce. Of late, though, digital orders have begun to feel pressure. As a recession weighs, the demand for overnight shipping could continue to take a hit. Regardless, Cargojet remains a top Canadian way to play the e-commerce trend.

The stock has fallen 48% from its peak. At just 7.7 times trailing P/E, CJT stock is close to the cheapest it’s been in many years. With a capable management team and strong longer-term secular tailwinds likely to exist once macro headwinds fade, Cargojet remains a top mid-cap stock to watch.

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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cargojet. The Motley Fool has a disclosure policy.

More on Investing

A worker uses a double monitor computer screen in an office.
Dividend Stocks

2 of the Best Canadian Stocks That Pay Out Monthly

These two Canadian dividend stocks are some of the best to buy, offering yields upwards of 5.4% and returning cash…

Read more »

Oil pumps against sunset
Energy Stocks

Suncor Stock: How Low Could it Go in 2023?

Suncor (TSX:SU) is up on the back of a bounce in oil prices but remains out of favour. Can new…

Read more »

clock time
Dividend Stocks

How Investors Can Build a $1 Million Portfolio in 12 Years

If you can handle it, you can certainly create a million-dollar portfolio in just 12 years, especially considering this dividend…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Passive-Income Seekers: 4 Safe Dividend Stocks to Own Beyond 2033

Dividend stocks are great, but only if they continue to perform after downturns as well. In the case of these…

Read more »

stock analysis
Tech Stocks

Investing in AI: 1 Cheap Tech Stock Poised for Growth

Docebo is a little-known Canadian tech firm that's unlocking the power of next-generation AI technologies.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

4 Big Dividend-Paying Stocks for 2023

These four stocks all earn strong cash flow and offer attractive dividend yields, making them some of the best to…

Read more »

A airplane sits on a runway.

1 Growth Stock Down 40% to Buy Right Now

This Canadian stock has years of growth potential, and considering the significant discount it trades at now, it's a top…

Read more »

grow dividends
Dividend Stocks

This 7.5 Percent Dividend Stock Pays Cash Every Month

If you need cash now, this dividend stock is certainly one I would consider that could double in share price…

Read more »