Small-cap stocks could deliver outsized returns in the long run, as these companies are still in earlier stages of development, can grow at an accelerated pace, and have significant room to expand. However, small-cap stocks are risky and highly volatile. They tend to react more sharply to shifts in market sentiment, changes in the economic outlook, and company-specific developments. A single earnings report, contract win, or setback can move a share price dramatically. Compared with blue-chip stocks, volatility is simply part of the small-cap landscape.
Thus, rather than chasing hype, Canadian investors should focus on small-cap companies with sound fundamentals, a proven business model that can be scaled, and strong leadership teams. These factors do not eliminate risk, but they can improve the odds of long-term returns.
With that context in mind, here are two top small-cap TSX stocks to buy right now for 2026.
Top small-cap stocks #1: Hammond Power Solutions
Hammond Power Solutions (TSX:HPS.A) is a compelling small-cap stock to buy right now for 2026. The company specializes in dry-type transformers, power quality solutions, and other magnetic products. These products are witnessing solid demand amid an ongoing push toward electrification.
While Hammond Power stock has already delivered a notable gain, the company’s underlying business momentum suggests there is still meaningful upside. Demand is being driven by robust activity in fast-growing sectors such as renewable energy, critical infrastructure projects, and energy distribution. This strength is reflected in Hammond’s order backlog, which remains elevated. By the end of the third quarter of 2025, the company reported a backlog that was 22.4% higher than the same period a year earlier, highlighting strong visibility into future revenue.
Management commentary from the most recent quarter reflects a positive trend. Data centre-related demand accelerated meaningfully, with the company securing substantial orders shortly after quarter-end. These new orders are expected to be shipped primarily in 2026.
Looking ahead, Hammond Power Solutions appears well-positioned to benefit from long-term electrification trends reshaping global energy and data infrastructure. In addition to organic growth, management continues to evaluate acquisition opportunities that could further enhance scale and market reach.
Moreover, its ongoing production initiatives and capital expansion efforts position the company well for sustained growth, driven by rising electricity consumption and demand for digital infrastructure.
Top small-cap stocks #2: 5N Plus
5N Plus (TSX:VNP) is an attractive small-cap stock to buy now for 2026, given its exposure to several fast-growing industries. The company focuses on advanced semiconductors and high-performance materials with applications in renewable energy infrastructure, space satellites, medical imaging, pharmaceutical, and industrial markets. As these end markets continue to expand, demand for 5N Plus’s highly specialized products will likely grow, supporting its financials.
This favourable demand backdrop has already translated into meaningful gains for the stock, and the outlook suggests further upside potential into 2026. Growth is being driven primarily by momentum in the Specialty Semiconductors segment, where demand from terrestrial renewable energy projects and space-based solar power remains robust. A recently expanded supply agreement with a key strategic customer is expected to materially lift volumes, with shipments projected to increase over the next couple of years. In parallel, the company is likely to benefit from a strong pipeline of space power projects.
Further, its leadership position in high-purity materials outside of China is increasingly important as global customers seek secure, diversified, and geopolitically resilient supply chains. This advantage strengthens its competitive positioning.
Overall, 5N Plus is an attractive small-cap stock to buy and hold for the long term.
