Strategists at Bank of Montreal forecasted in November 2024 that Canada’s primary stock exchange could outperform the S&P 500 in 2025. BMO’s chief investment strategist Brian Belski said, “We think Canada offers value and cyclicality and increase in stock picking, especially relative to the U.S.”
The TSX delivered a +17.99% overall return last year, and Belski sees the index to close at 28,500 by year-end, or +15.25% higher than in 2024. Interestingly, BMO thinks small-cap stocks will do very well over the next decade. The forecast is bold, although the next generation of winners could be Canadian small-caps.
In the 2024 TSX30 List, a flagship program for top-performing Canadian stocks, three of the top 10 stocks are small-cap stocks. Hammond Power Solutions, a $1.14 billion company, ranked number one with +928% in three years (dividend-adjusted share price performance). CES Energy Solutions and Bird Construction ranked fourth and seventh, respectively.
However, if you’re investing in potential multi-baggers, Propel Holdings (TSX:PRL) and Sylogist (TSX:SYZ) are the ideal small-cap stocks to buy today.
Financial technology
Propel rewarded investors with a mouth-watering 189.9% return last year. Had you invested $5,000 at year-end 2024, your money would have been $14,495.67 today. At $37.07 per share, the trailing one-year price return is +122.89%. This financial stock also pays a modest 1.62% dividend.
The $1.28 billion financial technology company provides online lending services through an artificial intelligence-powered platform. Its Lending-as-a-Service product line facilitates access to credit for consumers underserved by banks or traditional financial institutions.
According to management, Propel has reached an exciting inflection point after achieving its three growth objectives: geographic expansion, serving more consumers across the credit spectrum and strategic acquisitions. “There is still much more to come as we aim to become a global leader,” said Propel chief executive officer (CEO) Clive Kinross.
In the first three quarters of 2024, revenue and net income climbed 45.33% and 80.21% year over year to US$320.4 million and US$34.77 million. Propel’s solid financial position and continued earnings growth support the continued expansion of existing programs and increased dividends (a 7% hike recently).
Well-positioned to scale
Technology (+11.93%) is the second-best performing sector thus far in 2025, and Sylogist is among the hottest. At $10.02 per share, investors enjoy a +12.97% year-to-date gain on top of the 0.40% dividend yield. The $234.55 million public sector Software-as-a-Service (SaaS) company caters to government, non-profit, and education market segments.
In the third quarter (Q3) of 2024, total annual recurring revenue (ARR) and SaaS ARR rose 8% and 13% to $43.6 million and $29.2 million compared to Q3 2023. “Our Q3 performance further validates our successful transition to a SaaS-driven enterprise,” said Bill Wood, CEO of Sylogist.
Wood added that management is ahead of its plan, as evidenced by the 14% year-over-year increase in bookings to $8.7 million. The focus on high-value SaaS ARR growth is producing the desired results. He is confident that Sylogist can scale the business, generate higher margins, create operating leverage, and increase free cash flows.
Growth trajectory
Market analysts might temper their outlook for the TSX in 2025 because of impending additional U.S. tariffs on Canada. Nonetheless, a tariff war won’t impede the growth trajectories of Propel Holdings and Sylogist.
