Top small-cap stocks have higher growth potential and will likely deliver solid returns over time. However, as these are companies in their early growth phase, their stocks can be more volatile and carry higher risk. Thus, one should focus on Canadian stocks with solid fundamentals and the ability to deliver sustainable earnings in the long term. With this background, here are three top Canadian small-cap stocks to buy for the next three years.
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Small-cap stock #1
Investors looking for top small-cap stocks could consider 5N Plus (TSX: VNP), or 5N+. The company is a leading producer of specialty semiconductors and performance materials. 5N+ is well-positioned in the specialty semiconductors sector and is a leader in supplying ultra-high purity semiconductor compounds outside of China.
Further, the company has established long-term partnerships with key customers, ensuring a stable and reliable market for its advanced products. Moreover, as demand continues to grow, particularly in sectors like terrestrial renewable energy and space solar power, 5N+ is likely to capitalize on emerging opportunities. Notably, 5N+’s semiconductors are also gaining traction in markets such as sensing and medical imaging, further broadening its potential.
Meanwhile, 5N+’s performance materials segment presents another compelling growth avenue. The solid demand from the health and pharmaceutical sectors will likely bolster the segment’s performance. These markets not only deliver robust profitability but also provide predictable cash flows, enhancing the company’s financial stability. Additionally, 5N+ is actively pursuing product expansion and development initiatives, including collaborations and partnerships, to unlock new long-term opportunities.
Looking ahead, higher production volumes and a favourable product mix will likely drive its revenues. Moreover, its ongoing efforts to enhance productivity and reduce operating costs are likely to improve profitability. These factors set the stage for solid growth and likely drive its share price higher.
Small-cap stock #2
ADENTRA (TSX: ADEN) is another compelling Canadian small-cap stock to buy for the next three years. The company is a leading distributor of architectural building products. While inflation and elevated interest rates pose short-term challenges, the company’s solid operational performance, continued volume growth, and strategic acquisitions will likely drive its financials and stock.
ADENTRA’s growing scale, global sourcing, and supplier partnerships give it access to exclusive and branded products under favourable terms. Moreover, it has also enhanced its focus on high-value, installation-ready products, which augurs well for future growth. The company is leveraging advanced data analytics and digital platforms to improve asset management, maintain pricing, and grow online sales. Further, its tight control over expenses supports profitability.
Looking ahead, potential interest rate cuts, aging housing stock, solid market fundamentals, and acquisition opportunities position ADENTRA for multi-year growth in the residential, repair, remodelling, and commercial sectors.
Small-cap stock #3
WELL Health (TSX: WELL) is a top small-cap stock to buy and hold to create wealth. This multi-channel healthcare services provider consistently delivers solid revenue and earnings. Moreover, it generates positive cash flows, which provides a solid base for future growth.
WELL Health’s increasing omnichannel patient visits, acquisition of new clinics, and cost-cutting measures will likely drive its top and bottom lines. Moreover, the company is focusing on growing its cash flows, lowering debt, and enhancing operating efficiency, all of which are likely to sustain long-term growth and stability.
WELL Health is also exploring artificial intelligence-powered healthcare innovations and has a solid acquisition pipeline, which will expand its offerings and accelerate its growth.
