TSX stocks with 10 times potential need several ingredients to deliver substantial compounded growth. Firstly, they need a smart business model crafted around a great assortment of products or services. Secondly, they need a growing market opportunity or a large market to breach.
Thirdly, they need a balance sheet that can support growth opportunities. Lastly, it needs a management team that effectively manage the business and manage their capital to maximize long-term returns.
Certainly, this list isn’t comprehensive. However, it is a good foundation to find a stock that could compound substantial gains. A great place to hunt for 10 times returns is in small cap stocks. They are starting from a small base and often have long runways for growth. If you have $15,000 to plow into quality small-cap stocks, here are two I’d buy now.
A small-cap stock growing in the aerospace market
Firan Technologies (TSX:FTG) has a market cap of only $300 million. That’s after rising 62% year to date and 108% in the past year. In the past five years, its stock is up 600%!
Firan isn’t a super exciting business. It manufactures circuit boards and cockpit components for aircrafts. However, it is positioned in the right place at the right time. Airlines are desperate for new, efficient airplanes for their fleets. Aircraft manufacturers have a decade or more of backlog.
That translates into very strong demand for Firan’s components. Since the COVID-19 pandemic, Firan has made several smart acquisitions that have diversified its product assortment, manufacturing capacity, and customer exposure. It is moving into higher margin after-market parts and that should translate into stronger profit margins.
Firan has a long-term CEO who also happens to be one of the largest shareholders. It also has a great balance sheet, so the company can continue to fund growth initiatives. While its valuation has risen over the year, the company still has a large runway of growth. It’s a great bet to throw $15,000 at for a big long-term compounded gain.
A TSX software stock growing by acquisitions
VitalHub (TSX:VHI) has a market cap of $692 million. Its stock is neutral in 2025, but it is up 22% over the past 52 weeks. Over the past five years, VHI stock is up 363%.
VitalHub has been building out a software empire focused on the healthcare industry. The company has focused on bespoke solutions focused on patient care, care coordination, and workforce compliance. It offers services in Canada, the U.K., Australia, and the Middle East.
VitalHub has strategically consolidated several smaller software providers. In the past five years, revenues are up 500% and earnings before interest, tax, depreciation, and amortization (EBITDA) are up 1,143%.
Its stock is down after a recent financing. The healthtech is loaded with cash, so it is primed to keep growing by acquisitions. It is integrating some recent large acquisitions, so there could be some digestion in the near term. If VHI stock were to pull back more, it could be a great time to add it.
The Foolish takeaway
Look for small-cap stocks like Firan and VitalHub for attractive multi-bagger gains. These stocks can be volatile, but if they have the right investment formula, they can deliver life-changing returns over longer periods.
