This Small-Cap Stock Is up 20% This Year, and Here’s Why it Can Go Even Higher

microsoft, this small-cap stock is up 20% this year, and here’s why it can go even higher

Arrowings ascending on a chalkboard

Investing in quality small-cap stocks is a proven strategy to build long-term wealth. For instance, Microsoft was valued at less than US$800 million when it went public almost 40 years ago. Since its initial public offering, the software giant has returned a monstrous 428,000% to shareholders and is currently the largest company in terms of market cap.

While identifying the next Microsoft is next to impossible, investors can consider allocating a small portion of their investments toward small-cap stocks that are part of expanding addressable markets. One such TSX small-cap stock is Sylogist (TSX:SYZ), which is valued at $210 million by market cap.

Shares of Sylogist have already gained 20% in 2024 and are up close to 50% in the last 12 months. Let’s see why I’m bullish on this tech stock right now.

An overview of Sylogist

Sylogist is a public sector SaaS (software-as-a-service) company that provides ERP (enterprise resource planning), CRM (customer relationship management), fundraising, education administration, and payment solutions to entities.

It serves more than 2,000 customers globally, including various governments, non-profit organizations, educational institutions, and other public companies.

Sylogist enjoys a strong recurring and scalable service model that results in higher customer lifetime value. It enters into multi-year customer agreements that allow the company to derive a steady stream of cash flows across business cycles.

How did Sylogist perform in Q1 of 2024?

Sylogist ended the first quarter (Q1) of 2024 with annual recurring revenue (ARR) of $42.5 million, up 7% year over year. Its remaining performance obligations stood at $26.8 million, while bookings grew 18% to $9.1 million. The SaaS company reported a net retention rate of 106% in Q1, which means existing customers increased spending by 6% in the last 12 months.

Despite headwinds such as inflation, Sylogist posted an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $4.2 million, indicating a margin of 25.9%.

Sylogist stated it achieved record bookings in Q1, and a third of its 18% growth for this metric was partner-attached. In the year-ago period, Sylogist booked less than $110,000 of partner-attached wins, which tripled in Q2 and surged by eight times by the end of Q4, resulting in almost $1 million in partner-attached deals.

Lastly, Sylogist emphasized its sales pipeline expanded by 185% in Q1 due to strong performance across business segments.

Is Sylogist stock undervalued?

Analysts tracking Sylogist expect sales to rise from $65 million in 2023 to $72 million in 2024 and $81 million in 2025. Comparatively, its adjusted earnings per share is forecast to expand from $0.05 in 2023 to $0.15 in 2024 and $0.29 in 2025.

So, priced at 60 times forward earnings, the tech stock might seem expensive. However, a growth stock commands a lofty multiple, given its robust growth estimates.

Due to its consistent earnings, Sylogist also pays shareholders a quarterly dividend of $0.01 per share, indicating a forward yield of 0.45%. While the forward yield might seem unattractive, Sylogist should raise these payouts going forward, especially if its earnings growth accelerates.

Analysts tracking the TSX stock remain bullish and expect shares to surge over 40% in the next 12 months.

Should you invest $1,000 in Sylogist Ltd. right now?

Before you buy stock in Sylogist Ltd., consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Sylogist Ltd. wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,271.97!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 32 percentage points since 2013*.

See the 10 stocks * Returns as of 5/21/24

More reading

    Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sylogist. The Motley Fool recommends Microsoft. The Motley Fool has a disclosure policy.

    OTHER NEWS

    2 hrs ago

    Cowboys head coach Mike McCarthy 'getting fed up' with owner Jerry Jones: report

    2 hrs ago

    Who Should Steelers Hope Wins Training Camp QB Battle?

    2 hrs ago

    Goaltender's dad talks up the Oilers' chances of lifting the Stanley Cup

    2 hrs ago

    Phillies turn rare 1-3-5 triple play against Tigers, 1st since 1929

    2 hrs ago

    Discount Burger Check? Chiefs' Reid Shares Hilarious Commercial Story

    2 hrs ago

    'Devastating loss': Digital lending library, Internet Archive, removes 500,000 books after being sued by publishers

    2 hrs ago

    Iga Swiatek vs Coco Gauff vs Aryna Sabalenka vs Elena Rybakina: WTA ‘Big 4’ state of play ahead of Wimbledon

    2 hrs ago

    Would a Toronto byelection loss spell doom for Trudeau?

    2 hrs ago

    BlackSuit ransomware gang blamed for ongoing car dealership outages

    2 hrs ago

    'Unreal' injury-time equaliser saves football powerhouse

    2 hrs ago

    Nigel Farage accused of cosying up to the Kremlin by former NATO boss

    2 hrs ago

    Dagestan, in southern Russia, has a history of violence. Why does it keeps happening?

    2 hrs ago

    Marines revive a World War II airfield on Peleliu in Pacific pivot

    2 hrs ago

    Fortnite Brings Tilted Towers and Other Fan Favorite Locations, But With a Twist

    2 hrs ago

    Shadow of the Erdtree Puts the Cherry on Top of Elden Rings Main Strength

    2 hrs ago

    Anger erupts as Albo's governor-general is awarded payrise

    2 hrs ago

    Charo Makes Rare Public Appearance at Project Angel Food Event: 'Life Is Beautiful' (Exclusive)

    2 hrs ago

    Boozed-up England fans sing '10 German bombers' chant in Cologne

    2 hrs ago

    Show Respect: ‘Boys are surprised we talk about this, it’s become normalised’

    2 hrs ago

    After clash with prosecutor, judge reserves ruling on restricting Trump’s rhetoric about agents’ classified documents search

    2 hrs ago

    Peter Dutton’s nuclear plan ‘doesn’t deliver’ any ‘energy price decrease’ until 2040

    2 hrs ago

    Where to watch Netherlands vs. Austria live stream, TV channel, lineups, prediction for Euro 2024 match

    2 hrs ago

    China lunar probe to return to Earth with samples

    2 hrs ago

    Report: Knicks’ OG Anunoby declines player option, enters unrestricted free agency

    2 hrs ago

    Saints offensive line ranked 19th in the NFL

    2 hrs ago

    Senators acquire goaltender Linus Ullmark from Bruins

    2 hrs ago

    Why Qld feels like home for the Blues

    2 hrs ago

    Seahawks waive 3 undrafted free agents, make UFL champ signing official

    2 hrs ago

    Andrew Scott Frantically Runs to Hear Taylor Swift's ‘Style' at 'Eras Tour'

    2 hrs ago

    England’s Test series v New Zealand: Date, kick-off time and TV channel

    2 hrs ago

    Bills' McDermott Says Von Miller Has ‘Something to Prove’

    2 hrs ago

    US prosecutors want Boeing to face criminal charges

    2 hrs ago

    Finance Minister Michael McGrath set to become Ireland's new EU Commissioner

    2 hrs ago

    Red-hot Cardinals get huge boost in return of star catcher

    2 hrs ago

    How police use the mail to spy on you: 60,000 cases in last decade with little pushback

    2 hrs ago

    These 3 Republicans are Trump’s most likely VP picks

    2 hrs ago

    Roy Jones Jr. announces his son, DeAndre, died by suicide

    2 hrs ago

    Luxury Gyms, Like Equinox and Life Time, Are Taking Over Big Retail Spaces

    2 hrs ago

    Automobili Pininfarina PURA Vision wins prestigious Red Dot Award: Design Concept 2024

    2 hrs ago

    Pop legend Robbie Williams wears his AFL jersey to see if he still gets recognised in London - with some very surprising results