3 Canadian Micro-Cap Stocks To Buy in August

Micro-cap stocks are companies with relatively small market capitalizations, typically between $50 million and $300 million. These businesses are often in the early stages of growth or operate within niche markets. Investing in them carries higher risks, but with that risk comes the potential for life-changing returns in the long term, especially for those who take the time to research and understand these companies.

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In this article, we’ll take a closer look at a few Canadian micro-cap stocks that have been performing well recently. Some are new to the radar, while others have been discussed before but continue to show promise.

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Payfare $PAY.TO

Payfare Inc. (TSX: PAY) is a fin-tech company focused on providing instant payouts and digital banking solutions for gig workers in Canada, the United States, and Mexico. With a market cap of around CA$350 million, Payfare is addressing the growing financial needs of gig economy participants. The company’s main source of revenue is its Internet Software & Services segment, which brought in CA$195.63 million over the past year.

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The company’s recent Q2 2024 financial results displayed its strong performance and growth potential. Payfare reported a 20% increase in revenue year-over-year, bringing in $56 million, while gross profit rose by 25% to $13.9 million. Net income saw a significant boost as well, climbing 132% to $4.9 million, and adjusted EBITDA grew 39% to $6.6 million. This profitability is particularly notable in the fintech sector, where many companies struggle to achieve consistent profits.

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The company’s user base is also growing quickly, with 1.4 million active users as of Q2 2024, marking a 26% increase from the previous year. This growth is supported by important partnerships, like the extended agreement with Lyft, which continues to provide financial services to drivers. Payfare has also rolled out new products, such as the Uber Pro Card, which are helping to strengthen its role in the gig economy.

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Despite operating in a competitive and fast-changing industry, Payfare’s strong balance sheet, highlighted by $67 million in cash and $28 million in liquid investments and no debt, gives it a solid foundation for future growth.

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ADF Group Inc. $DRX.TO

ADF Group Inc. (TSX: DRX) operates in the non-residential construction industry, focusing on the design, engineering, and fabrication of complex steel structures. The company serves various sectors across Canada and the United States, including commercial buildings, airports, industrial complexes, and infrastructure projects. Founded in 1956 and rebranded in 1998, ADF Group has developed a solid reputation in the steel structure fabrication niche.

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The company has shown strong financial performance in recent quarters. In the first quarter of fiscal 2025, which ended on April 30, 2024, ADF reported a revenue increase of 33.8% year-over-year, reaching $107.4 million. The gross margin also improved significantly, rising to 29.2% from 16.8% in the same period last year. This increase in profitability was driven by better absorption of fixed costs and continued benefits from automation investments at ADF’s Terrebonne, Quebec plant. Net income for the quarter saw an impressive 184.2% increase, coming in at $15.3 million.

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ADF's ongoing success is supported by strategic investments in automation and technology, including a fully robotized steel beam fabrication and assembly line. Over the past 15 years, the company has invested $125 million in upgrading its facilities, increasing production capacity, and improving operational efficiency.

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ADF Group has been improving its operations and financial performance. With a strong order backlog and solid finances, the company is well-positioned to continue growing and take on new projects in the non-residential construction market.

Q2 Metals Corp. QTWO.V

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Q2 Metals Corp. (TSXV: QTWO) is a Canadian mineral exploration company focused on lithium and gold projects in Canada and Australia. The company’s assets include the Mia Lithium Property and the Cisco Lithium Property, both located in the Eeyou Istchee James Bay Territory of Quebec, Canada. Among these, the Cisco Lithium Property has particularly caught the attention of investors recently due to its promising drilling results.

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Recent developments at the Cisco Lithium Property are encouraging. Q2 Metals drilled 12 holes at this site, with each one intersecting substantial spodumene pegmatite intervals, a key indicator of lithium-rich deposits. Notably, drill hole CS-23-05 revealed a cumulative interval of 115.4 meters, with lithium oxide grades up to 1.91%, while CS24-010 encountered ten intervals totalling 194.8 meters, with the widest being 86.6 meters. These results point to a potentially large and commercially viable lithium deposit, making Cisco a standout project for the company.

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Adding to the property's promise, the spring 2024 field program discovered eight new spodumene occurrences, bringing the total to 15. The mineralization extends over an area of 1.1 by 3.5 kilometres, indicating a significant and continuous lithium-rich zone. Q2 Metals is pushing forward with plans to drill an additional 10,000 to 12,000 meters at Cisco, backed by a strong financial position after the recent successful closure of two funding tranches.

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Sources

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Payfare Inc.: Information in this article is sourced from Payfare’s official website, corporate presentations, and recent press releases.

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Q2 Metals Corp.: Information in this article is sourced from Q2 Metals’ official website, corporate presentations, and recent press releases.

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ADF Group Inc.: Information in this article is sourced from ADF Group’s official website, corporate presentations, and recent press releases.

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