The small- and mid-cap stocks may finally be worth picking up, especially as “small value” looks to outpace “large growth.” Either way, I’d encourage beginner investors to consider giving some of the Canadian hidden gems a bit of a closer look, especially after their recent bout of positive momentum.
While the broader TSX Index is still being led by some of the most glorious large-caps (think the big banks, shining gold miners, and resilient energy plays), I do think that there’s a slightly higher chance of uncovering an even larger discount with some of the stocks with market caps well below the $5–25 billion mark. In this piece, we’ll check in on two smaller-cap stocks that look timely with impressive fundamentals, and, perhaps most impressive, dirt-cheap valuation metrics.
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Badger Infrastructure Solutions
First, we have shares of Badger Infrastructure Solutions (TSX: BDGI), which are now up over 80% in the past year, thanks in part to solid demand for its hydrovac excavation services. Undoubtedly, the AI boom is only adding to the infrastructure buildout. Grid upgrades and more demand for energy are only making the tailwinds of top industrial players that much stronger. As we progress through the year, investors should keep watch of where operating margins move. Steady growth and rising margins could be the formula for next-level dividend growth.
And while the 1.1%-yielding dividend isn’t all too impressive, I do think that the capital gains potential and dividend growth prospects make the name one of the most enticing smaller-cap stocks to stash on a watchlist. The stock may seem fairly valued now at 28.6 times trailing price-to-earnings (P/E). Still, given its unique moat, I view the latest 13% pullback as nothing more than an entry point for interested buyers who seek growth, value, and a durable dividend in the mid-cap waters.
The $2.4 billion company may be relatively small, but its moat is no less impressive, at least in my view. It’s quite pricey to invest in a fleet of hydrovac-equipped trucks. And in industrial booms, Badger is right where it wants to be. The real upside is what could happen if management can keep executing and driving further efficiencies. In the meantime, shares of BDGI are a mid-cap winner with everything it takes to keep the wins coming!
DPM Metals
DPM Metals (TSX: DPM), or Dundee Precious Metals, may be one of the best mid-cap operators to bet on the gold and silver boom. Undoubtedly, the stock has been hot of late (225% gain in the past year and 530% gain in two years), outshining its larger rivals in the mining scene. Despite the gains, the stock still doesn’t look anything close to expensive at 20.6 times trailing P/E.
With non-stop quarterly beats, a rock-solid balance sheet, some enviable operating economics, and continued momentum in gold prices, I’d be inclined to stay the course with this high-flyer, which may be deserving of a further upside re-rating, especially if gold prices continue to march higher from current levels. All considered, DPM is a smaller player that might have what it takes to keep outpacing its larger brothers in the space.
