2 Growth Stocks That Could Skyrocket in 2025 and Beyond

In the ever-evolving landscape of the stock market, finding the next big thing can be a daunting task. With the TSX up 16% in 2024, valuations have risen, and the bargains of 2023 and early 2024 are harder to come by. However, there is a hidden gem in the market: small-cap stocks. These companies, with market capitalizations between $100 million and $1 billion, offer a unique blend of growth potential and undervaluation that larger-cap stocks often lack. Let's dive into two small-cap stocks that could deliver incredible returns in 2025 and beyond: Calian Group (TSX:CGY) and Sangoma Technologies (TSX:STC).

Calian Group (TSX:CGY) is a diversified company providing a mix of services that include healthcare, cybersecurity, training, and advanced technologies. With a market cap of $591 million, Calian has delivered solid growth in the past few years. Revenues have increased by a 17% compounded annual growth rate (CAGR), and earnings before interest, tax, depreciation, and amortization (EBITDA) have increased by a 25% CAGR. Despite a recent pullback due to government budget reductions, Calian has made significant strides in diversifying its business by customer and geography. Recent acquisitions have resulted in considerable contract wins and backlog growth, positioning the company for future earnings growth in 2025. The stock is currently trading at a price-to-earnings ratio below 10, making it an attractive investment opportunity.

However, Calian is not without its challenges. As a major contractor to the Canadian military, the company's business could be affected by changes in government policies or international relations. Additionally, the integration of recent acquisitions could be complex and time-consuming. Despite these challenges, Calian's strong financial performance and diversification efforts make it a compelling investment opportunity for the long term.

Sangoma Technologies (TSX:STC) is another small-cap stock that could deliver a strong rise in 2025. With a market cap of $285 million, Sangoma provides a large portfolio of communication software for small-to-medium businesses. The company has faced tough times in recent years due to a challenging market and poor acquisition and operational execution. However, with a new management team focused on organizational efficiencies and integrating its vast software offerings, Sangoma is well-positioned to start taking share in its core small-to-medium business market. The company generates a lot of cash and has been able to quickly deleverage and improve its balance sheet. At seven times free cash flow, the stock is still cheap, and if management can return this company to a growth posture, there could be considerable upside ahead.

In conclusion, small-cap stocks like Calian Group and Sangoma Technologies offer a unique blend of growth potential and undervaluation that larger-cap stocks often lack. While they come with higher risk due to their smaller size and less established market presence, the potential for exponential growth makes them an attractive investment opportunity for the long term. As always, investors should carefully consider their risk tolerance and investment goals when deciding between small-cap and larger-cap stocks.