Canadian microcap stocks can deliver explosive investment returns. Microcap stocks belong to a unique group of small public companies, most of which are largely unknown to the investing public. They are usually under-covered by investment banking analysts. And although usually under-appreciated by the market, they often pack enough growth potential to deliver lucrative (and sometimes life-changing) returns to investors who can stomach their high volatility.
Technically, and academically, microcap stocks are small companies with low or ‘micro’ capitalizations of less than $300 million. However, I had the personal liberty of pushing my screening criteria to $360 million (a little encroachment into small-cap stock territory) to find more microcap stocks with compelling investment prospects to buy today, or to keep an eye on.
Exro Technologies (TSX: EXRO) and A2Z Smart Technologies (TSXV: AZ) are two Canadian microcap stocks that should be on your radar right now. Let’s have a closer look.
Exro Technologies
Exro Technologies is a small Canadian engineering firm that produces electronics for electric motors and generators. The company went public recently in 2017, and EXRO stock went parabolic in a market-wide rally in 2020. The $358 million micro-cap stock could rise again as its new patented technology for electric motors enjoys wider adoption in a fast-growing electric vehicle (EV) industry and an expanding stationary energy storage market.
What could make EXRO stock go higher? The company is entering a strong revenue growth phase in 2023. Exro is scheduled to commence the production of its new Coil Driver and Cell Driver products during the third quarter of 2023 – a key milestone that ushers in a new growth phase and de-risks the company’s business operations.
In a factory test this quarter, the 800 Volt Exro Coil Driver reportedly delivered 40% more high-speed power than the competition. The efficiency gains are noticeable. The company could score new customer wins in an ongoing Europe and Asia marketing campaign. Exro recently signed a commercialization agreement with Linamar Corp.
Three financial analysts cover Exro Technologies stock. Analysts project strong 402% year-over-year growth in the company’s 2023 sales and a much stronger 413.7% surge in revenue to $56 million in 2024.
Rapid revenue growth will be a desired source of internally generated cash flows that will de-risk the small business and launch it into a new internally funded growth spree.
EXRO stock has delivered a 650.9% five-year return to early investors. Its next sales-growth-propelled rally could make new investors wealthier.
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A2Z Smart Technologies
A2Z Smart Technologies is an aerospace and defense micro-cap stock that has strong price momentum this year as it expands its total addressable market by revolutionizing retail shopping. AZ stock has gained 97.4% so far this year. Early investors could be sitting on a 495% gain over the past five years. However, I believe there’s more oomph in the innovative company’s value proposition.
The $138 million company IPOed in 2018. It originally specialized in providing military and unmanned robotics, automation, and electronics to the Israeli Defense and Security forces. Its developing two new products targeting the automotive market: A capsule placed in a fuel tank to prevent gas tank explosions during collisions and a vehicle cover device for protection against extreme weather conditions. However, that’s not why AZ stock is surging lately.
A2Z’s latest, and most trendy product, is its smart, modular shopping cart (the Cust2Mate). The innovative cart scans products as soon as a shopper drops them in. It has on-cart payment capabilities and records customer preferences for future shopping trips. It saves retail customers on time spent in-store and may reduce the personnel complement needed in a retail store – a win for both consumers and retailers.
The company will earn monthly hardware sales revenue (Product-as-a-Service (PaaS) revenue); charge software-as-a-service (SaaS) revenue on invoicing, inventory, and customer intelligence gathering software; and earn marketing revenues on targeted coupons, advertisements, and loyalty programs.
Analysts expect A2Z to grow sales by 68% year over year in 2023 and 128% to $47 million by 2024. Strong revenue growth over the next 12 months could power the micro-cap stock higher.
AZ stock price has almost doubled so far this year.
