Investing in small-cap companies with strong fundamentals could be a solid long-term strategy for creating wealth. These companies present substantial upside potential compared to larger, more established firms. However, along with their growth prospects comes increased risk and volatility, especially in the current economic climate marked by macro uncertainty and tariff-related challenges, which have negatively impacted small-cap stocks.
Despite these challenges, the recent pullback in small-cap stocks has provided investors with an opportunity to acquire shares of companies with strong fundamentals and promising growth prospects.
Against this backdrop, here is the smartest small-cap Canadian stock to buy with $900 right now.
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The smartest small-cap stock
Investors looking for the smartest small-cap stock could consider 5N Plus (TSX:VNP). It is a leading producer of specialty semiconductors and performance materials, specializing in advanced materials used in technologies that power the future.
It operates through two business segments, including specialty semiconductors and performance materials. The semiconductor division produces ultra-high purity compounds essential for applications in the renewable energy, space satellite, and imaging technologies markets. Meanwhile, its performance materials are used across pharmaceuticals, healthcare, and industrial sectors in North America, Europe, and Asia.
The company’s exposure to these high-growth sectors positions it well to consistently deliver solid financials. For instance, in the first quarter (Q1) of 2025, 5N Plus reported a 37% year-over-year increase in revenue. Robust sales in terrestrial renewable energy and space solar power drove this growth. Moreover, increased demand for bismuth-based products in the healthcare sector supported its financials.
Profitability has also surged. The company’s net earnings soared to $9.6 million, up from just $2.5 million a year earlier. This performance reflects higher sales volumes and 5N Plus’s ability to navigate inflationary pressures through strategic pricing.
Despite facing broader market challenges, 5N Plus’s strong results have sparked a sharp rebound in its stock price. Over the past month, VNP stock has climbed 45.6%, including a 16% gain since its Q1 earnings announcement on May 7. However, considering its large and fast-growing addressable market, the stock has significant upside potential.
5N+ to deliver solid growth
Looking ahead, 5N Plus is well-positioned to continue its growth trajectory. In the specialty semiconductor space, it is the leading global supplier of ultra-high-purity compounds outside China, which provides a competitive advantage. Further, with long-term partnerships and growing demand from sectors like renewable energy and space technology, 5N Plus is poised to deliver solid growth.
Additionally, emerging opportunities in imaging and sensing applications, especially in the security, defence, and medical sectors, could provide meaningful growth. The anticipated adoption of photon counting detector (PCD) technology in medical imaging offers a promising growth avenue in the medium term.
On the performance materials side, the healthcare and pharmaceutical markets remain key drivers, offering stable and profitable growth. Additionally, bismuth chemical sales could grow in line with broader economic trends across key markets.
With its strong foothold in high-growth sectors, 5N Plus is well-positioned to navigate economic uncertainties. Moreover, it continues to expand its production capabilities to meet rising demand, which augurs well for growth.
In short, 5N Plus is a solid long-term small-cap stock to buy now for $900.
