Small-cap stocks have a market capitalization between $300 million to $2 billion. Given their small size, these companies are highly susceptible to market volatility and could outperform during favourable environments. These companies have more room for growth and could deliver superior returns in the long term. Considering all these factors, here are three top small-cap stocks for investors with longer investment horizons and higher risk-tolerance abilities.
Savaria
Savaria (TSX: SIS) focuses on designing, distributing, and installing accessibility solutions for disabled and older people worldwide. The company has 16 manufacturing facilities across Canada, the United States, Europe, Mexico, and China. Supported by these widespread manufacturing facilities, it continues to deliver solid performance.
In the recently reported first-quarter earnings, the company’s top line grew by 15.3% amid solid organic growth of 13.5%. Due to unfavourable weather conditions, construction would be slower in the first quarter, impacting its commercial lift and home elevator sales. However, thanks to its diversified product portfolio, the company has lowered this impact, with its Patient Care segment growing by 17.2% during the quarter.
Besides, adjusted net earnings increased by 24% amid solid top-line growth and margin expansion. It also generated an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $31.2 million, representing a 27.8% increase from the previous year’s quarter. As of March 31, the company had $135 million of available funds to support its growth initiatives.
Meanwhile, Savaria has an optimistic target of reaching $1 billion in annual revenue by 2025. So, it is making strategic investments in new product development, improving its processes, and strengthening its headcount. Further, it also pays a monthly dividend with its forward yield at 3.07% and trades at an attractive NTM (next 12 months) price-to-sales multiple of 1.3, making it an attractive buy.
goeasy
Second on my list would be goeasy (TSX: GSY), which offers leasing and lending services to subprime customers. The company has been under pressure over the last few months due to rising interest rates and the federal government’s intent to lower the maximum allowable annual percentage rate (APR) on loans to 35% from 47%. Amid the weakness, the company has lost close to 50% of its stock value compared to its 2021 highs. In the steep correction, the company’s NTM price-to-earnings has declined to an attractive 7.7.
The discounted stock price and cheaper valuation offer an excellent buying opportunity for long-term investors. Besides, the value lender is growing its loan portfolio at a healthier rate. In the March-ending quarter, the company’s loan portfolio grew 39% to $3 billion. Meanwhile, management expects the loan portfolio to reach $5.1 billion by 2025. Further, its net charge-off rate and provisions for loan losses are declining, which is encouraging. Also, 64% of its consumer loan portfolio carries an interest rate of less than 35% APR. So, considering its growth prospects, cheaper valuation, and a forward dividend yield of 3.47%, I am bullish on goeasy.
WELL Health Technologies
My final pick would be WELL Health Technologies (TSX: WELL), which leverages technology to aid healthcare practitioners in offering omnichannel services. Amid technological advancements and growing internet penetration, the adoption of telehealthcare services is growing, expanding the addressable market for the company.
Meanwhile, the company focuses on artificial intelligence to develop next-generation tools to improve customer experience and reduce administrative expenses. The company has strengthened its presence in Canada, the United States, and Germany through strategic acquisitions. For 2023, management expects its revenue and adjusted EBITDA to grow by 23% and 10%, respectively.
Despite its healthy growth prospects, WELL Health trades at an NTM price-to-earnings of 15.5, making it an attractive buy.
