Small-cap stocks offer higher growth prospects than large and mid-cap stocks. However, these companies are riskier and highly susceptible to market volatility. So, investors with higher risk-tolerance ability can invest in these stocks to reap superior returns. Meanwhile, here are three top small-cap TXS stocks you can go long on, given their underlying solid business and healthy growth prospects.
goeasy
goeasy (TSX: GSY) offers leasing and lending services to subprime customers. The company has delivered solid performances over the previous 20 years, with its revenue and adjusted EPS (earnings per share) growing in double digits. Despite the strong growth, its market share in the $200 billion subprime lending market is minimal, thus offering it excellent growth prospects.
Meanwhile, the company is witnessing strong demand, with record credit applications in the June-ending quarter. The lender saw strong growth across its product range and acquisition channels, including unsecured lending, home equity lending, power sports financing, and auto financing. Despite the increase in its net charge-off rate from 8.5% in the previous year’s quarter to 9.3%, it remained within the company’s guidance of 8.5% to 10.5%.
Further, the company is also enhancing its products, pricing, and cost structure to minimize the impact of the government’s plans to lower the maximum allowable interest rate. Also, it has raised its dividends for nine consecutive years at an annualized rate of over 30.9%. GSY’s forward yield stands at 3.52% and it trades at an attractive NTM (next 12 months) price-to-earnings multiple of 7.3, making it an attractive buy.
WELL Health Technologies
Second on my list would be WELL Health Technologies (TSX: WELL). With extensive front and back-office management software applications, the company’s digital healthcare platform supports healthcare practitioners in running their businesses. The growing adoption of virtual healthcare services has created multi-year growth potential for the company.
Meanwhile, WELL Health acquired Seekintoo and Proack Security last week, strengthening its cybersecurity portfolio and safeguarding patient trust and operational integrity. Further, it recently launched WELL AI Decision Support, in partnership with HEALWELL AI, to help practitioners diagnose diseases. Also, the company is expanding its presence in the United States and Canada, which could continue to drive its financials in the coming years.
However, amid the broader weakness, WELL Health has lost 21.8% of its stock value since the beginning of September and trades at an attractive NTM price-to-earnings multiple of 11.2. Considering all these factors, I believe this small-cap stock would be an excellent long-term bet.
Pizza Pizza Royalty
As my final pick, I opted for Pizza Pizza Royalty (TSX: PZA), a monthly-paying dividend stock. Given its highly franchised restaurant business, its cash flows are stable and predictable despite rising prices and wage inflation. Also, the company has been posting solid same-store sales this year, driving its royalty pool income. Supported by solid financials, the company has raised its monthly dividends seven times since April 2020. With a monthly dividend of $0.075/share, PZA’s forward yield stands at a juicy 6.78%.
Meanwhile, Pizza Pizza Royalty plans to expand its restaurant network and expects to increase its restaurant count by 3-4% this year. Also, its menu innovations, promotional activities, and old restaurant renovation initiatives could continue to drive same-store sales growth. So, the company’s future payouts should be safe.
