3 Stocks Under $5 Ready to Break the TSX Mould

Three growth stocks under $5 could break out and deliver far superior returns than the typical investment choices on the TSX.

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The S&P/TSX Composite is vibrant, with 11 primary sectors and thousands of stocks to choose from. Most investors lean toward the sectors with the highest percentage weights. Four sectors comprise 73.89% of the index’s total weight.

The financial (35.44%) and energy (17.27%) sectors dominate with more than 50% percentage weight combined, followed by materials (10.60%) and industrials (10.58%). However, some investors have excellent options in other sectors.

WELL Health Technologies (TSX:WELL), StorageVault Canada (TSX:SVI), and Wildbrain (TSX:WILD) belong to the healthcare, real estate, and communications services sectors. These cheap growth stocks are ready to break the TSX mould.

Long-term growth stock

WELL Health continues to impress with its market-beating returns. At $3.72 per share, the year-to-date gain is 31.34%, while the overall return in five years is 693.62% (51.26% compound annual growth rate, or CAGR). The $895.66 digital healthcare company is Canada’s largest owner and operator of healthcare clinics.

Management aims to enhance WELL’s market leadership as the country’s first pan-Canadian clinical network. The competitive advantage is a highly integrated network of tech-enabled outpatient healthcare clinics across the country.

In the third quarter (Q3) of 2023, revenue increased 40.2% year over year to $204.5 million — a new record. WELL’s founder and chief executive officer (CEO), Hamed Shahbazi, said, “Q3 was an outstanding quarter for us, as we achieved record patient visits, adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization], and posted our first quarter ever with more than $200M in revenues.

Shahbazi added that WELL made significant investments in artificial intelligence. The company commits to supporting healthcare providers with the most advanced technology.  

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Doable growth strategy

StorageVault is Canada’s largest storage provider, with over 238 storage locations (206 owned) nationwide. Besides self-storage solutions, the $1.75 billion company also provides last-mile storage and logistics solutions as well as professional records management services.  

Governments, commercial entities, and individuals form the customer base of this 13-year-old safe keeper of belongings. The real estate stock is down 22.13%, but market analysts are bullish. Their 12-month low price target is $7, a potential 49.5% jump from the current share price of $4.68. SVI also pays a modest 0.24% dividend.

Its chief financial officer, Iqbal Khan, said there’s robust demand for SVI’s space. In Q3 2023, revenue increased 9.2% year over year to $75.74 million. Net income reached $14.28 million compared to a net loss of $3.47 million in Q3 2022. SVI desires to have multiple stores in each market. The growth strategy focuses on acquisitions, organic growth, and store/business expansions.

Flying under the radar

WildBrain flies under the radar and is absurdly cheap at $1.10 (-64.74% year to date). It focuses on entertainment for kids and families globally. The team specializes in content creation, audience engagement, and global licensing.

The $225.9 million company produces award-winning series The Snoopy Show and Teletubbies, among others. WildBrain’s television group owns and operates some of Canada’s most-viewed family entertainment channels.

Although revenue has declined to $105.5 million and net loss has widened to $15.5 million in Q3 2023, WildBrain expects a turnaround in 2024. The company will concentrate on key brands and launch a new CG-animated Peanuts feature film on Apple TV+.   

Far from mediocre

The stocks in focus sell for under $5 per share but are not mediocre investments, especially WELL Health Technologies. All three could deliver superior returns than the typical investors’ choices.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Apple. The Motley Fool has a disclosure policy.

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