There is a good reason why “all-star” companies (and their stocks) in the making are difficult to identify, and it’s that there is no standardized path to success. For some companies, it’s strong fundamentals in a healthy market with no competition.
In contrast, others manage to make their mark in the market, because they offer something unique and unprecedented and carve out a fresh market for themselves.
Still, leaders in a specific market niche that stand out from the rest of the sector/industry might be well positioned to become all-stars, and two such small-cap stocks may deserve your attention.
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A healthcare stock
Consolidation is nothing unique and happens in almost all industries in Canada. Some large players absorb smaller players and effectively eliminate a lot of competition. It means that Dentalcorp Holdings (TSX: DNTL) is not unique per se, but the company is doing it in an industry that is still largely fragmented — i.e., dental practices.
The company has already developed a massive network, with over 530 locations and 9,735 team members catering to over five million patients annually. The company has augmented this network and business potential by partnering with a wide range of healthcare facilities and businesses across Canada.
The performance of the Dentalcorp stock, a newcomer in the stock market, has been quite unflattering so far. After a brief uptick following its inception, the stock has mostly gone down and has lost over 60% of its valuation since Nov. 2021.
The healthcare sector at large can be blamed for part of the slump, considering the fact that the capped healthcare index has fallen about just as much over that period.
The primary reason to consider this stock an all-star in the making is its business model. If it keeps growing its network and emerges as a trusted name in Canada, the stock may experience a powerful rise.
A tech stock
Tech stocks in Canada have a decent number of all-stars already present in the line-up and a few in the making as well. The latter includes Coveo Solutions (TSX: CVO), which is currently marketing itself as the only artificial intelligence (AI) platform specifically built for improving digital experiences.
This is a powerful combination in the tech sector, and even though Coveo’s financials are certainly showing some promise, the company has yet to fully deliver on the potential it promises.
The stock has been bullish since May and, so far, has risen by about 76%. Many experts and some well-known investors have taken an interest in the company recently, and it has received positive buy ratings. We can attribute this optimism to its AI associations, but if the stock can truly emerge as an AI-powered leader in digital experience, it would become a compelling investment.
- We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if Coveo Solutions made the list!
Foolish takeaway
The two stocks and the underlying companies show promise, but they have yet to fully deliver on their promise. They are not exactly flying under the radar, but they are still relatively ignored by the mainstream market, so buying them now may prove fruitful in the long run, especially if they emerge as the all-stars they are expected to become.
