Small-cap stocks have a market capitalization between $300 million and $2 billion. These companies offer higher growth prospects and could deliver superior returns in the longer term. However, these companies are riskier due to their higher susceptibility to market volatility. So, investors with higher risk tolerance abilities can buy these stocks to reap higher returns. Against this backdrop, I have picked three small-cap stocks that investors can buy and hold forever.
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Savaria
Savaria (TSX:SIS) develops, manufactures, and markets accessibility solutions worldwide. With its manufacturing facilities spread across North America, Europe, and China and a solid distribution network, the company is able to market its products worldwide. Supported by healthy organic growth and strategic acquisitions, the company has increased its revenue and adjusted EPS (Earnings per share) at an annualized rate of around 27% and 11%, respectively. Meanwhile, the demand for accessibility solutions continues to rise driven by an aging population and rising income levels.
Meanwhile, Savaria is continuing with “Savaria One,” a multi-year program focusing on innovative product development, improving operating efficiency and throughput, and expanding its market share. Propelled by its healthy growth prospects, the company projects its 2025 revenue to cross $1 billion while improving its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin to over 20%. Besides, the company also pays monthly dividends, with its forward dividend yield currently at 2.8%. Meanwhile, SIS stock is trading at an attractive NTM (next 12 months) price-to-earnings multiple of 17.2, making it an excellent buy.
WELL Health Technologies
Another small-cap stock that I am bullish on is WELL Health Technologies (TSX:WELL), which focuses on developing new products and services to aid healthcare professionals in delivering positive patient outcomes. In the first three quarters of 2024, the company has grown its topline by 33.3% amid organic growth and continued acquisitions. Its adjusted EBITDA and adjusted net income have grown by 11.2% and 11.7% during the period, respectively.
Moreover, more people are adopting virtual healthcare services, given the accessibility, convenience, technological advancements, and cost-effectiveness, thus driving the demand for WELL Health’s products and services. Besides, the increased adoption of software solutions in the healthcare sector and digitization of patient records would also support its growth in the coming years. Further, the company has made seven acquisitions since December last year, which are expected to contribute $100 million annually to its topline. Also, it currently has 12 letters of intent, which can raise its annual revenue by $65 million. So, its growth prospects look healthy. Besides, WELL stock’s valuation also looks attractive, with the company trading 1.5 times analysts’ projected sales for the next four quarters.
Cargojet
Third on my list would be Cargojet (TSX:CJT), which offers cargo airline services to prominent Canadian cities. The global air cargo hauler also offers unique overnight delivery services to 90% of Canadians. Besides, it earns around 75% of its domestic revenues from long-term contracts, thus stabilizing its financials. The company has reported healthy performance in the recently reported quarter, with its topline growing by 14.8%. The volume growth in e-commerce and B2B businesses, price hikes for contractual customers, additional aircraft deployment, and the starting of scheduled charter services between China and Canada have boosted its topline.
Supported by topline growth and gross margin expansion, the company’s adjusted EBITDA grew by 17.4% to $82.2 million. It also generated free cash flows of $47.8 million, representing a 60.4% increase from the previous year. The cargo airliner has also lowered its debt levels by repaying $106.9 million in the first nine months of 2024. Amid these repayments, its net debt-to-EBITDA (trailing 12 months) ratio has declined to 2.2 compared to 2.6 at the beginning of 2024.
Moreover, the growing e-commerce and improvement in economic activities amid falling interest rates and easing inflation could drive the demand for Cargojet’s services. CJT stock trades at a reasonable valuation, with its NTM price-to-earnings multiple of 19.8, making it an excellent long-term buy.
