The stock market comprises companies that are part of multiple sectors. In addition to various sectors, these stocks can also be differentiated on the basis of market cap. For instance, the 60 largest companies on the TSX make up iShares S&P /TSX 60 Index ETF. Alternatively, the TSX Venture Exchange provides you with exposure to a plethora of small- and micro-cap companies.
Typically, companies that are part of the TSX Venture offers investors the potential to derive outsized gains. But they also carry significant risk due to the volatility associated with their stock prices and a challenging macro environment.
So, if you have a large risk appetite and a long-term investing horizon, you can consider investing in these two TSX venture stocks in 2023.
Topicus.com
One of the largest companies trading on the TSX Venture Exchange, Topicus.com (TSXV: TOI) is valued at a market cap of $7.3 billion. Topicus develops software and offers related support services to its base of enterprise clients, primarily based in Europe.
It has almost doubled sales from $417.4 million in 2019 to $916.7 million in 2022. Unlike most other high-growth tech stocks, Topicus reports consistent profits and ended 2022 with an operating income of $134 million.
Topicus has increased its sales by focusing on highly accretive acquisitions. In 2022, its top line surged by 23% year over year primarily due to these acquisitions, as its organic growth stood at 4%. In the fourth quarter (Q4), the company deployed close to $15 million towards acquisitions.
Priced at eight times trailing sales, TOI stock might seem expensive. But its portfolio of mission-critical and high-impact software solutions results in high customer engagement rates and recurring revenue.
It has more than 100,000 customers in 14 countries, allowing it to generate more than $200 million in operating cash flow in the last four quarters. TOI stock is currently trading 38% below all-time highs, allowing you to buy the dip.
Eguana Technologies
A micro-cap company valued at a market cap of $105 million, Eguana Technologies (TSXV: EGT) has increased sales from $3.4 million in 2019 to $7.1 million in 2021.
Operating the clean energy space, Eguana designs and manufactures residential and commercial energy storage systems for fuel cells and battery applications in Canada and other international markets.
Eguana recently published its preliminary revenue numbers for the December quarter and reported sales of $10.3 million — an increase of 300% year over year. Its sales in the last four quarters, its sales have more than doubled to $17 million.
The company reported record sales in Q4, as supply chain constraints eased. Further, its new line of micro-inverter products also saw increased adoption by installers in the United States. According to Eguana, its training initiatives are also resulting in higher product demand through distribution channels.
Eguana Technologies is part of a rapidly expanding addressable market, as the demand for energy storage systems is expected to gain pace in the upcoming decade. For instance, the demand for home batteries is expected to rise from $2 billion in 2018 to $15 billion in 2025, providing the company with enough room to accelerate its sales.
The transition towards clean energy solutions is inevitable, providing Eguana with multiple tailwinds to expand its sales over time.
