As the new year approaches, it’s a great time to evaluate your investment strategy and add some high-quality investments. small cap stocks with strong growth potential to your wallet. Small-cap stocks can significantly improve your portfolio’s performance and help diversify risk.

Small-cap stocks represent companies that are in the early stages of growth and have the potential to generate outsized returns. However, these stocks are very volatile. Investors should therefore seek Canadian stocks with solid fundamentals and numerous growth opportunities to maximize their returns. In this context, here are the top Canadian small-cap stocks with high potential.

#1 Small Cap Stock

Canadians looking for top small-cap stocks might consider adding GOOD Health (TSX: GOOD). This digital healthcare company is growing rapidly, generating profitable growth, and trading at an attractive valuation, making it an obvious addition to your portfolio.

WELL Health’s extensive clinic network, omnichannel patient services, and focus on developing and selling proprietary software and technology solutions drive patient visits to its platform, support sales, and help the company generate significant positive cash flows. Additionally, the company continues to benefit from its aggressive acquisition strategy, which expands its offerings and accelerates its growth rate.

Looking ahead, WELL Health’s strong acquisition pipeline and significant growth opportunity in the high-margin affiliated clinic licensing business bode well for growth. As WELL Health is poised to report strong financial results, the digital healthcare company is focused on building shareholder value by reducing stock dilution and minimizing the issuance of additional shares. The company is also reducing debt and increasing profits through the cost optimization program.

It trades at a multiple of two of enterprise value (EV) to sales over the next 12 months, which looks attractive compared to its historical average.

Overall, WELL Health is poised to deliver tremendous growth, improve shareholder value, and deliver attractive value near current market pricing.

Small Cap Stock #2

CES Energy Solutions (TSX:CEU) is another attractive small-cap stock with great potential. This vertically integrated company manufactures advanced consumable chemical solutions for the energy sector. CES has significant exposure to the North American oil and gas sector, where drilling operations are becoming increasingly complex and production is accelerating. This drives massive demand for CES’s specialty chemicals, which, in turn, determines its financial performance and stock price.

The asset-light business model, designed to withstand the ups and downs of the industry, supports CES Energy’s bullish stance. The company’s counter-cyclical balance sheet ensures stable cash flows throughout industry cycles, while its recurring revenues from chemical production provide reliable financial data in all market conditions.

Several favorable industry trends further support CES’ growth prospects. Factors such as longer lateral drilling, intensive hydraulic fracturing and rig optimization are pushing oilfield operators to seek advanced chemical solutions, which will benefit CES. Additionally, as energy companies seek greater efficiency, employing faster drilling techniques and extending well reach, CES remains well positioned to capture increasing market share.

CES is well positioned to deliver solid growth, driven by stable upstream activity, increasing adoption of advanced chemical technologies and increased service intensity. In addition, favorable raw material prices in North America play a favorable role. In summary, CES is poised to deliver explosive growth, which will increase its stock price and enable it to increase shareholder value.