Although a weakening market and economic environment can be disconcerting in the short term, savvy investors know that the resulting selloffs create some of the best opportunities to buy stocks that you can hold for years. And there may not be better stocks to buy on the TSX than small-cap stocks with significant growth potential.
When you can find a high-quality, small-cap stock to buy, the potential is enormous. Often, these stocks are still expanding their businesses rapidly and have a long runway of growth potential.
In addition, small-cap stocks are usually more volatile than larger, more established companies. So, not only can these stocks offer superior long-term growth potential, but during a market selloff, they can also offer investors some of the best discounts.
And while there are certainly many small-cap TSX stocks to buy today, here are three of the best to consider adding to your portfolio.
One of the best small-cap stocks you can buy on the TSX
If you’re looking for a small-cap TSX growth stock, one of the best to consider, especially in this environment, is Park Lawn (TSX: PLC).
Park Lawn provides deathcare services — an industry that’s typically quite defensive. Furthermore, it’s one of the largest publicly traded funeral, cremation, and cemetery operators and has been growing rapidly over the last few years.
Back in 2013, Park Lawn owned just six cemeteries in Toronto. Today, just 10 years later, it owns more than 130 cemeteries and 130 funeral homes across North America.
Despite this impressive growth, though, Park Lawn’s market cap is currently below $1 billion, showing it still has years of growth potential ahead of it.
In 2022 its sales increased by over 20% year over year, and this year its sales are expected to grow by over 10%.
So, if you’re looking for small-cap TSX stocks to buy today, Park Lawn and its defensive operations is one you’ll want to consider.
A top specialty finance stock
Another impressive small-cap TSX stock to buy now and hold for years is goeasy (TSX: GSY), a financial company that provides leasing and lending services to consumers with below-prime credit ratings.
One of the reasons why goeasy has performed so impressively over the years and continues to grow its sales and earnings considerably is that it operates in a niche sector. By providing loans to customers with below-prime credit ratings, it doesn’t have to compete with the big banks.
Furthermore, because below-prime customers have a higher risk of defaulting on their loans, goeasy can charge higher interest rates. Even with this increased risk, though, goeasy has managed its loan book well, and even in this uncertain economic environment, its chargeoffs have remained low and manageable, as they have through the last few years.
This has led goeasy to more than double its revenue in just the last four years. Furthermore, it’s more than tripled its normalized earnings per share over that stretch.
So, if you’re looking for a high-potential small-cap TSX stock to buy now, goeasy is trading unbelievably cheap in this environment.
An impressive healthcare tech stock with short- and long-term growth potential
Lastly, WELL Health Technologies (TSX: WELL) is one of the best growth stocks on the TSX, and with a market cap of just $1 billion, it has massive growth potential over the coming years.
WELL owns a diversified portfolio of telehealth businesses and digital health apps and is also the largest owner-operator of medical outpatient clinics in Canada.
The stock was upgraded to the TSX at the beginning of 2020. Over that span, it’s increased its sales from just $32 million at the end of 2019 to more than $566 million in 2022.
And going forward, it continues to have significant growth potential, both organically and by making value-accretive acquisitions. WELL may not be cheap for long, though. Already in 2022, it’s rallied by more than 53%.
So, if you’re looking to buy high-quality small-cap stocks on the TSX, WELL is one you’ll want to consider today.
