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Due to high inflation, many people have lost out on their purchasing power. However, there are some small-cap TSX stocks to watch, that can offer investors significant long-term gains over time without putting too much of a strain on their wallets. Nonetheless, this possibility of earning such significant profits also entails higher capital risks. This is because, in contrast to large-cap stocks, small-cap Canadian stocks generally lack the ability to withstand difficult market circumstances and, as a result, carry a higher level of risk.
Still, if you want to add some small-cap Canadian stocks to your portfolio to diversify it, you might want to think about including the below-mentioned stocks.
Small-cap TSX Stocks to Watch
Docebo is a top-quality company in the Canadian tech industry and one of the top small-cap TSX stocks to watch this month. This Toronto-based organization is in the process of providing cloud-based learning management systems to help organizations train their internal and external workforces, partners, or customers across the region of North America, Europe, and the Asia-Pacific. It has a platform that centralizes learning materials from peer enterprises and learners to a learning management system (LMS) and thereby expedites the learning process, increases productivity, and grows teams uniformly.
For the past few months, the tech industry as a whole has been suffering from high inflation levels, and the Docebo stock hasn’t fared much better. The company has lost more than 56% of its value so far this year and is currently trading near its 52-week low level. Despite delivering back-to-back good financial outcomes, in contrast to the majority of similar types of tech stocks that can be seen these days, this significant decrease in the company’s valuation has occurred.
However, one might be optimistic about the Docebo stock’s development given its solid core performance and intriguing strategic connections. Reaping the benefits of its expanding customer base and the greater penetration of high-value clients with multi-year contracts, the company has continued to achieve significant organic sales growth over the period.
Additionally, Docebo’s outstanding customer retention rate and the upward trend in average contract value over time are its two most crucial strengths. The market believes that the company will be able to create additional revenues from its clients in the upcoming years even with the limited cost support margins. Moreover, the growing transaction size and product expansions are also encouraging for its organic growth, while strategic alliances, opportunistic acquisitions, and geographical expansions will further guarantee an increase in its addressable market.
Further, Docebo has its focus on AI and digital transformation, a sector that is newly booming and isn’t going away anywhere anytime soon. As per Fortune Business Insights, the global digital transformation market that was valued at $737.88 billion back in 2020, is expected to go up to $3546.8 billion by 2028 growing at a CAGR of 22.1% during the projected period. This proves the total addressable market of the company is also still huge and as days pass more and more opportunities will be coming its way.
Docebo closed July 13 at $35.54 and the average target price for the stock is $80.57, a potential upside of over 126%. So, this recent pullback in the price levels of the Decebo stock presents a solid buying opportunity for growth-oriented investors.
Well Health Technologies is a Vancouver-based multichannel digital health technology company that is the country’s largest owner and operator of outpatient health clinics. It provides primary healthcare facilities to the people living across Canada and The United States along with delivering EMR services to clinics and doctors across the country. Its end-to-end omnichannel patient services are of immense importance for the country’s people.
This telehealth company has witnessed rapid growth over the years and now has a market valuation of over $732.39 million. It has quickly risen to prominence in the health sector. This novel approach to patient care was made the new norm by the pandemic, which heightened its development even further. Now, with all the economic slowdowns and growing levels of inflation, the world is transitioning into the post-pandemic age, which has severely hampered the growth of this stock. Well Health is currently trading close to its 52-week low and is therefore exceptionally cheap after losing roughly 40% of its value this year.
Well Health’s share price does not necessarily reflect its financial performance by large. Even in this dull phase, it has been continuing to boost its financials capitalizing on the rising popularity of virtual services.
As per Fortune Business Insights, the global telehealth market that was valued at $144.38 billion back in 2020 had shown a massive 135.2% growth during the year from the 2017-19 levels and might grow into a $636.38 billion industry by 2028 projecting a growth rate of 32.1% between the periods of 2021-2028. Due to this, there will be plenty of chances for the organization to expand its operations in the years to come. Furthermore, the field of health technology, which may be recession-resistant, gives the business the much-needed impetus.
Well Health closed July 13 at $3.17 and the average target price for the stock s $8.73 which is a potential upside of 175%. Well Health’s growing propensity for M&A activity is another element that may fuel the company’s growth. The company is now working to acquire INLIV, a premier omnichannel primary care provider. Well Health’s footprint in the province of Alberta will increase as a result of this action.
The company’s management believes that post this acquisition, its revenue might surpass $525 million and EBITDA could reach levels of $100 million. Additionally, a lot of investors may be interested in the management’s automatic share-purchase plan (ASPP), which would allow it to repurchase 2.5 percent of the outstanding shares.
The above-mentioned stocks’ growth rates may be slightly hindered in the short term by rising inflation levels and interest rates, but the long-term outlook for these small-cap Canadian stocks is very encouraging. Nevertheless, before adding Docebo or Well Health one should be aware of the dangers involved with these small-cap Canadian stocks.
The stock market, in general, is fundamentally risky, and investing in such small-cap Canadian stocks may not be suitable for the risk appetites of the majority of investors. Therefore, before purchasing any of them, a person should conduct their own study.
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