When choosing a good stock, market capitalization is essential, at least for some investors. Most conservative investors are comfortable with large-cap companies, while others may cast a wider net to include small-cap. But even in that size range, investors usually avoid companies at the lower end (around $300 million market cap) and go for their larger peers.
This might be a mistake because you might overlook some promising picks like the following three.
An agricultural company
Canada is home to the largest fertilizer company in the world, and it’s easy to forget smaller companies like Itafos (TSXV: IFOS) that might get lost in its shadow. Itafos is a phosphate and specialty fertilizer company based in the U.S. with a strong presence in Brazil.
It is one of the only three super phosphatic acid (SPA) fertilizer producers in the U.S. and, despite its small size, has captured a sizable piece of the market.
The stock had an amazing run in the post-pandemic bullish market, rising by 2,400% in less than two-and-a-half years. Since then, it has been in a correction mode. But the trajectory is changing. The stock has started rising steadily and has risen 28% in the last six months alone. At this pace, it can double your capital in just two years.
An automobile company
Markham-based Exco Technologies (TSX: XTC) has two main business segments: automotive solutions that manufacture various components (primarily interior) for automotive manufacturers and the casting and extrusion segment. The company is a global leader in the latter segment, with 17 tooling plants in nine countries.
An important thing to understand is that despite being a small-cap company, it’s a giant in its niche market. The financials are solid as well. This makes its dividends at the 5.3% yield appealing, especially considering its stable payout history and the fact that it grew its payouts three times in the last five years. It’s pretty attractively valued right now.
A tech company
Sylogist (TSX: SYZ) is a Software-as-a-Service (SaaS) company with over 2,000 public and private sector customers. The three main market domains, each with a purpose-built SaaS platform, are government, education, and mission (non-profits). This clientele has specific strengths, like long-term value and reliability.
The company has experienced impressive financial growth in the last three years, with revenues growing from $41.7 million in 2021 to $65.5 million in 2023.
The stock performance has followed this pattern, albeit with a significant delay. It has been going up almost consistently since the beginning of 2023 and has risen by about 87%. This is quite impressive, even compared to other tech stocks in Canada.
Foolish takeaway
The three stocks are worth considering because, despite their relatively small sizes, they have promising businesses and impressive reach and customer portfolios. All three are already rewarding (two in terms of growth potential; one for its dividends), though they may become more compelling with the right trends and catalysts in place.
