3 Up-and-Coming Canadian Microcap Stocks to Keep an Eye on

Microcap stocks like MDA (TSX:MDA) should be on your watch list.

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Large-cap and blue-chip stocks get all the attention in the stock market. However, smaller challengers are emerging in exciting new industries that growth investors should be aware of. 

These Canadian microcap stocks could be on the verge of becoming household names if they continue their current growth trajectory. Here are the best up-and-coming stocks you should keep on your radar. 

Microcap stock #1

What happens when you take a proven business model, combine it with fresh capital, and unleash it on a new continent? The answer is Topicus (TSXV:TOI). The company was spun out from Canadian enterprise tech giant Constellation Software last year. It basically replicates the Constellation growth-via-acquisition model in Europe. 

So far, the strategy seems to be working. In 2022, the company completed acquisitions worth €183.1 million, or CA$269 million. That’s approximately 3.6% of its current market value. Topicus also saw 23% revenue growth and 15% growth in cash flows from operations last year. 

The company has doubled down on its acquisition strategy while software valuations dipped. As these acquisitions become fully integrated, I expect the growth to be reflected on Topicus’s earnings reports soon. Keep an eye on this emerging tech stock. 

Microcap stock #2

Lumine (TSXV:LME) is another Constellation spin-off. The company was recently listed and, so far, hasn’t caught the attention of retail investors. 

Lumine is focused on niche software companies in the media and communications sector. The portfolio already includes mission-critical tools like TOMIA, a digital media monetization platform and Ubersmith, a subscription management software platform. The company recently announced the acquisition of Titanium and Wideorbit — more niche media software companies to enhance the portfolio. 

Lumine stock trades at $14.6, which implies a market cap of $930 million. The stock also trades at a price-to-earnings ratio of 25, which is cheaper than its peers and also its former parent company.  Growth investors should certainly keep an eye on this emerging opportunity. 

Microcap stock #3

MDA (TSX:MDA) is the undervalued microcap stock I’m most excited about. The company is an established player in the emerging commercial space tech race. It’s worth just over $827 million at the time of writing; however, it has more than $1.4 billion in pending orders on its books. 

Not only are those pending orders lucrative, but they’re also iconic. MDA is currently developing the robotic arm (Canadarm 3) that will sit on the lunar gateway being developed by NASA’s Artemis mission to the moon. Meanwhile, the company is actively developing satellites for the emergency SOS feature on the latest iPhone. 

As the commercial space tech industry matures, I expect MDA to expand rapidly. Keep an eye on this exciting microcap stock.

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 Vishesh Raisinghani has positions in Constellation Software, Mda, Lumine, and Topicus.com. The Motley Fool has positions in and recommends Topicus.com. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.

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