Given their smaller size, small-cap stocks offer higher growth prospects and can deliver superior returns in the longer run. Owing to their limited resources, however, these companies are highly susceptible to market volatility, thus making them riskier. So, investors with longer investment horizons can buy these stocks to earn superior returns. Here are three top small-cap stocks you could consider buying now.
WELL Health Technologies
WELL Health Technologies (TSX: WELL) is a digital healthcare company focusing on leveraging technology to facilitate healthcare practitioners offering virtual services. It also owns and operates an extensive network of tech-enabled outpatient healthcare clinics across Canada.
Technological advancements and increased internet penetration have led to increased adoption of telehealthcare services, thus creating multi-year growth potential for the company. Meanwhile, the company has invested in AI (artificial intelligence) technology to develop new products and enhancements, which could improve patients’ experience. Amid its growth initiatives and continued acquisitions, WELL Health’s management has provided impressive 2023 guidance. The guidance projects revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to grow by over 21% and 10%, respectively.
Meanwhile, WELL Health has witnessed solid buying this year, with its stock price rising by over 90%. Its solid quarterly performances appear to have increased investors’ confidence, driving its stock price higher. Despite the surge, its NTM (next 12 months) price-to-sales multiple stands at 1.8, making it an attractive buy.
Savaria
Savaria (TSX: SIS) is another worthy small-cap stock to have in your portfolio due to its impressive performance and healthy growth initiatives. Last month, it reported a solid first-quarter performance. Its topline grew 15.3% to $211.6 million driven by strong organic growth of 13.5%. Its accessibility and patient care segments reported impressive gains, while its adapted vehicles segment witnessed a marginal decline of 0.8%, impacted by unfavourable currency translation.
Also, its gross margin expanded by 2.1% to 34%, thus driving its net profits. For the quarter, the company posted an adjusted EPS (earnings per share) of $0.13, representing a 30% increase from its previous year’s quarter. Further, the company’s management projects revenue growth of 8-10% for this year amid rising demand, cross-selling initiatives, and higher backlog levels. Additionally, management hopes to reach revenue of $1 billion by the end of 2025. So, its growth prospects look healthy.
Savaria pays a monthly dividend of $0.0433/share, translating into a forward yield of 3.03%. Its valuation also looks attractive, with its NTM price-to-sales multiple at 1.3.
Jamieson Wellness
Jamieson Wellness (TSX: JWEL), which manufactures, markets, and distributes natural health products across 45 countries, would be my final pick. Over the previous five years, the company has returned over 70% at a CAGR (compounded annual growth rate) of 11.2%. Healthy financials and strategic acquisitions have driven its stock price. Since 2018, the company’s revenue and EPS have grown at a 12.7% and 16.2% CAGR, respectively.
I expect the uptrend in Jamieson Wellness’ financials to continue, given its focus on product expansion, strengthening of its distribution channels, and e-commerce growth. The company’s management projects its 2023 revenue to grow by 22-28%, while its adjusted EPS could increase by 5-11%. It also pays a quarterly dividend of $0.17/share, with its forward yield currently at 2.2%.
Meanwhile, the company has been under pressure this year, losing over 14% of its stock value. Amid the pullback, JWEL trades at an NTM price-to-earnings multiple of 18.1, making it an excellent long-term buy.
