Kalkine Media explores 5 TSX small-cap stocks to watch in November

Highlights

• As of September 30, 2022, Headwater’s sales rose to C$ 94.94 million (94 per cent increase).
• In Q3 2022, the operating income for Athabasca was reported at C$ 140.08 million.
• As of June 30, 2022, total net debt of Uni-Select declined to US$ 291.41 million.

Small-cap stocks are usually those companies that range between US$ 300 million and US$ 2 billion. They have a smaller market capitalization than the other players. The scope of these stocks is directly proportional to the market environment and the business dynamics. In case of growth, these stocks may outperform their counterparts. When considering the rewards and growth exposure, small-cap stocks are a must to mention.

For an investor, there are certain factors that are pivotal, and dividend is one of them. These small-cap stocks provide dividends keeping the value for investors intact. But before investing in such stocks, it is crucial to analyze and check your risk tolerance.

With smaller capitalization, these stocks may be exposed to volatility and high risk. But with the right approach and research, they may showcase growth prospects and desired results. The fundamentals should be intact before selecting your stocks. But due to the current market volatility, small-cap stocks may be operating as undervalued stocks. Hence, investors must look at their portfolio from the risk and growth perspective to understand their requirements.

Let us look at five small-cap stocks and their performance in the latest quarter:

1. Headwater Exploration Inc. (TSX:HWX)

Headwater Exploration Inc. is engaged in development and exploration of oil and gas. Further, the company is into production, exploration and development of natural gas and petroleum. The major source of revenue for Headwater is through the sale of natural gas, crude oil, and natural gas liquids.

As of September 30, 2022, Headwater’s sales rose to C$ 94.94 million (94 per cent increase) from C$ 48.84 million on September 30, 2021. The cash flow by operating activities also grew to C$ 72.06 million from C$ 27.88 million during the same comparative period.

The net income of the company increased by 21 per cent to C$ 31.54 million from C$ 26.1 million. Moreover, the funds flow from operation also rose to C$ 58.44 million (85 per cent increase) from C$ 31.52 million. The EPS of the company is 0.67 and the P/E (price to earnings) ratio is of 10.80.

2. Athabasca Oil Corporation (TSX:ATH)

Athabasca Oil Corp majorly operates under two segments-Thermal Oil and Light oil out of which the former becomes the major source of revenue for the company. Further, the company is engaged in development and exploration of liquids-rich natural gas and light oil.

In Q3 2022, the operating income (loss) of Athabasca Oil Corp was reported at C$ 140.08 million from C$ 120.58 million in Q3 2021.

As on September 30, 2022, the cash and cash equivalents fell to C$ 200.1 million from C$ 223.05 million on December 31, 2021. The graph below displays the total market capitalization of HWX, ATH, UNS, SOY, and MTY.

3. Uni-Select Inc. (TSX:UNS)

Uni-Select Inc is engaged in the distribution of automotive and paint related products. The company caters to motor vehicles and operates in The Parts Alliance UK segments, FinishMaster US, and Canadian Automotive Group. FinishMaster US segment serves as the major revenue source for Uni-Select Inc.

As of June 30, 2022, the sales of Uni-Select Inc. increased to US$ 444.32 million from US$ 416.41 million in the same quarter of the previous year. The adjusted EBITDA also rose to US$ 48.59 million from US$ 488 thousand for the same period. The net earnings also soared to US$ 22.78 million from a loss of US$ 20.25 million. The cash flow from operating activities also witnessed an increase and was reported at US$ 50.75 million from US$ 43.28 million.

The total net debt of Uni-Select saw a decline and was noted at US$ 291.41 million from US$ 309.23 million. The EPS (earnings per share) of Uni-Select is 1.52.

On July 25, 2022, Uni-Select announced its definitive agreement to acquire Maslack Supply Limited.

4. SunOpta Inc. (TSX:SOY)

SunOpta Inc deals in healthy product portfolio. The company operates in three segments- fruit-based foods, plant-based foods, and beverages.

In Q2 2022, SunOpta’s revenues increased by 20.4 per cent to US$ 243.5 million compared to the same quarter of the previous year. Further, the company reported net earnings at US$ 2.5 million versus net loss of US$ 0.9 million. The adjusted EBITDA also increased by 38.4 per cent to US $22.3 million compared to US$ 16.1 million. SunOpta’s total debt increased to US$ $296.5 million from US$ $224.6 million.

The gross profit rose to US$ 34.9 million by US$ 8.6 million.

5. MTY Food Group Inc. (TSX:MTY)

MTY Food Group Inc deals in casual dining food and quick service industry.  The company operates under multiple banners for the sale of retail products through franchising and operating corporate-owned locations. Some of the company’s brand includes- Country Style, Cafe Depot, Big Smoke Burger, Croissant Plus and others.

In Q3 2022, the adjusted EBITDA rose to C$ 50 million compared to C$ 49.7 million in Q3 2021. The net income for the company was at C$ 22.4 million versus C$ 24.3 million for the same period. MTY’s revenue in Q3 2022 rose to C$ 171.54 million from C$ 150.8 million in Q3 2021. MTY announced a quarterly dividend of C$ 0.21 per share with a dividend yield of 1.474 per cent. The P/E ratio of the company is 15.30 and its EPS is C$ 3.78.

On September 27, 2022, the company acquired BBQ Holdings, Inc.

Bottom Line

Investors seeking growth and income must follow a diversified approach. Small-cap stocks usually grab a smaller market of the total share. Hence, be ready to pick different stocks from different sectors. This diversification adds an element of risk minimization to your portfolio. 

However, investor must know the risk involved in such stocks. So, make sure to check with the fundamentals and prospects of the stocks selected.

Please note, the above content constitutes a very preliminary observation based on the industry and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.