Market analysts, including BMO Asset Management, remain bullish on small-cap stocks. Companies with market caps of $250 million to $2 billion are not anchor stock material, although they can improve diversification and boost returns of investment portfolios.
The performance of the S&P/TSX SmallCap Select Index thus far in 2025 confirms the bullish sentiment. This index has outperformed the TSX year-to-date (+23.6% versus +20.38%), amid the broad market’s hot streak in September.
Today, Ballard Power Systems (TSX:BLDP) and Black Diamond Group (TSX:BDI) have the potential to deliver returns in 2025 and beyond.
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Return to profitability
Growth investors are familiar with Ballard Power Systems, a TSX30 winner for three consecutive years (2019-2022), and it appears to be returning to the winning circle. At only $3.79 per share, the positive year-to-date return is 58.6%.
The $1.1 billion fuel cell technology company is realigning and adjusting its commercial focus to achieve positive cash flow by the end of 2027. Management’s bold plan involves simplifying the product portfolio, modifying staff, and achieving a 30% reduction in operating expenses by 2026.
In Q2 2025, revenue increased 11% to $17.8 million compared to Q2 2024, while net loss thinned 23% year-over-year to $24.3 million from a year ago. According to its President and CEO, Marty Neese, Ballard will focus on real, near-term opportunities. “We continue to believe in the necessary role of hydrogen and fuel cells to decarbonize select heavy mobility and stationary power applications.”
Ballard Power Systems is a key player in the renewable energy sector, particularly in hydrogen technology. The company has $0 in bank debt and sufficient financial liquidity to support its sustainable business model over the long term.
Fast-rising from obscurity
Black Diamond ranked 30th in the 2023 TSX30 List, an annual ranking of Canada’s 30 top-performing growth stocks. As of this writing, the share price is $12.45, with a market-beating year-to-date gain of 33.4%. This industrial stock also pays a modest 1.1% dividend.
The $820.3 million growing company provides products and services to address the space, accommodation, and travel needs of customers. Black Diamond’s two business units, Modular Space Solutions (MSS) and Workforce Solutions (WFS), cater to various industries, including the government sectors.
Infrastructure spending in North America drives MSS growth, while WFS delivers strong free cash flow (FCF). In the first half of 2025, revenue and profit increased 23% and 67% year-over-year to $207.6 million and $15 million, respectively. FCF climbed 23% to $36.3 million from a year ago.
Black Diamond stated that the $192.9 million in available liquidity as of June 30, 2025, can fund continued organic and inorganic growth opportunities. For the rest of 2025, the company anticipates strong secular tailwinds.
Moreover, the high-margin rental revenue streams from the diversified rental platform are expected to continue, notwithstanding macroeconomic uncertainty. The long-lived rental assets can serve as a hedge in an inflationary environment.
Higher growth potential
Small-cap stocks are riskier than large-cap stocks. However, companies like Ballard Power Systems and Black Diamond deserve consideration. Both stocks have substantial upside growth potential.
