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Small-cap stocks have high-growth potential and can deliver superior returns in the long run. However, these companies are highly vulnerable to market volatilities and riskier than large- and mid-cap stocks. So, investors with higher risk-taking abilities and a longer time frame can invest in these stocks to earn superior returns. Meanwhile, here are four small-cap stocks with higher growth potential.
My first pick is an online grocery, home meal, and meal kit delivery company, Goodfood Market (TSX:FOOD). Amid the recovery in growth stocks, the company’s stock price has increased by 9.4% in the last two days of trading. Despite the surge, the company still trades 75% lower than its 52-week high, providing an excellent buying opportunity.
Given its convenience, more people are adopting online grocery shopping, expanding the addressable market for Goodfoood Market. Meanwhile, it is strengthening its last-mile delivery capabilities to increase the speed of delivery. Last month, it announced raising around $30 million through convertible unsecured debentures to fund the rollout of more than 20 micro fulfillment centres, increasing its delivery speed. Its new product launches, expansion to new markets, and strengthening of production capabilities could also contribute to growth. So, given its healthy growth potential and discounted stock price, I am bullish on Goodfood Market.
Second on my list would be Absolute Software (TSX:ABST)(NASDAQ:ABST), specializing in endpoint security and zero-trust security. Despite reporting a solid first-quarter performance in November, the company is trading at a 58% discount from its 52-week high. Investors fear that the reopening of the economy could slow down its growth, thus dragging its stock price down. Its forward price-to-sales multiple has declined to a low of two.
With rising digitization, remote working, and remote learning, the addressable market for the company is growing. Meanwhile, Absolute Software is introducing new innovative products to increase its presence in the cyber security segment. So, its outlook looks healthy. The company also pays quarterly dividends, with its forward yield at 3.06%.
Savaria (TSX:SIS) is another top small-cap stock that offers healthy growth prospects. It provides accessibility solutions to aged and physically challenged individuals across several countries. With rising income levels and growing aging population, the addressable market for Savaria is growing.
Meanwhile, the company’s acquisition of Handicare has expanded its product offerings, increased its distribution network, strengthened its production capabilities, and improved efficiency. So, the uptrend in the company’s financials could continue. Despite its healthy growth prospects, the company trades at an attractive forward price-to-earnings multiple of 21.8. Also, it pays a monthly dividend, with its forward yield at 2.73. So, Savaria can deliver superior returns in the near to medium term.
My final pick would be Aurora Cannabis (TSX:ACB)(NYSE:ACB), which has witnessed a 76% decline in its stock value compared to its 52-week high. The delay in the legalization of cannabis at the federal level in the U.S. has dragged the company’s stock price down. However, its financials are improving, and its growth prospects look healthy.
The company has acquired a 23% market share in the Canadian medical cannabis segment. Given its superior margins, the company is allocating more resources to strengthen its position further. Meanwhile, it also focuses on expanding its presence in Europe, which could grow to a $5 billion business by 2025. Along with these growth initiatives, its cost-cutting measures could help the company move toward profitability. So, I believe Aurora Cannabis could be an excellent bet for long-term investors.