Investing in quality small-cap stocks and holding them over time is a proven strategy to generate inflation-beating returns. Several big tech stocks, including Apple, Amazon, and Nvidia, were once small-cap companies flying under the radar. However, these fundamentally strong stocks, part of rapidly expanding addressable markets, have delivered game-changing returns to shareholders over the past two decades.
In this article, I have identified three small-cap stocks Canadian investors should buy right now.
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Is this small-cap stock a good buy?
Alvopetro Energy (TSXV: ALV) reported a strong start to 2025, with January and February production averaging 2,375 barrels of oil equivalent per day, up 37% from the fourth quarter (Q4) of 2024. The company recently increased its dividend to US$0.10 per share, representing a yield of around 10%.
The Brazil-focused natural gas producer secured an upgraded gas sales agreement with Bahiagás, increasing sales by 33% with prices recalculated quarterly based on Brent and Henry Hub benchmarks. Current realized natural gas prices exceed $10.5 per thousand cubic feet (MCF), generating industry-leading operating netback margins of 86%. One MCF is equal to 1,000 cubic feet of natural gas.
Alvopetro maintains a strong balance sheet with $13.2 million in working capital and no debt. It recently expanded into Canada’s heavy oil sector, drilling two multilateral wells expected to begin production within 30 days.
With a disciplined capital allocation strategy that balances growth with shareholder returns, Alvopetro presents a compelling investment case while offering shareholders an attractive dividend yield.
Is the TSX tech stock a good buy?
Valued at a market cap of $215 million, Vecima Networks (TSX: VCM) reported disappointing results in fiscal Q2 of 2025 (ended in December). While sales rose by 15% year over year to $71.2 million, the top line was down 13% on a sequential basis.
Moreover, Vecima posted a net loss of $7.9 million or $0.32 per share and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $1.1 million, down from $12.5 million in the year-ago period due to $4.3 million in non-cash foreign exchange losses.
Its gross margins declined to 36.4% from 49.8% the previous year due to product mix changes and increased shipments of lower-margin platforms. Vecima also implemented a 12% workforce reduction expected to yield $17.5 million in annualized savings.
Despite financial challenges, Vecima maintains strong market positions with a 40% global share in Remote PHY and over 80% in Remote MACPHY. It continues advancing its virtual CMTS solution with lab trials at four North American MSOs (multi-system operators) and expects revenue contribution by year-end.
Management acknowledges near-term uncertainty due to customer project timing and potential U.S. tariffs. Still, it remains confident in long-term growth as cable operators continue to upgrade their networks to support multi-gigabit services. Vecima also maintained its quarterly dividend of $0.055 per share, which yields 2.5%.
Should you own this small-cap energy stock?
The final TSX small-cap stock on the list is Total Energy Services (TSX: TOT), which reported a record revenue in 2024. Total Energy increased sales by 15% year over year in 2024, but EBITDA declined by $4.7 million. The company generated significant free cash flow, which enabled a $25.5 million debt reduction and returned $35.2 million ($0.92 per share) to shareholders through dividends and share buybacks in 2024.
Total Energy maintains a strong financial position with $78.7 million in working capital, including $38.4 million in cash, and a conservative debt profile with a senior debt-to-EBITDA ratio of just 0.25 times. The board approved an 11% dividend increase, reflecting confidence in future performance.
Total has announced a $61.9 million capital budget for 2025, with $34.3 million dedicated to equipment upgrades and growth opportunities. Chief Executive Officer Daniel Halyk indicated current market conditions make share buybacks “extremely compelling” and remains optimistic about long-term energy demand despite industry cycles.
