Investing in lower-priced, high-quality small-cap shares is a sound technique for producing market-beating returns over time. On this article, I’ve recognized two such TSX shares which are buying and selling under $20 as of October 2025.
Is that this small-cap TSX inventory purchase?
Valued at a market cap of $175 million, Xtract One Applied sciences (TSX:XTRA) develops and sells AI-powered menace detection methods that routinely scan folks for weapons like weapons and knives at venue entrances.
These merchandise embody SafeGateway and SmartGateway options that use sensors to establish hid threats with out invasive searches. The corporate serves stadiums, casinos, colleges, workplaces, and different high-traffic amenities requiring safety screening.
Xtract One Applied sciences reported weaker-than-expected third-quarter outcomes, with income falling to $3.5 million from $4.7 million within the prior yr interval.
Xtract One defined that it’s shifting from smaller offers to Fortune 100 purchasers, who require longer analysis durations, thereby considerably extending the gross sales cycle. Nevertheless, this shift in technique also needs to ship bigger and extra predictable contracts over time.
Xtract One’s money burn elevated through the quarter attributable to upfront manufacturing prices for the One Gateway rollout. The corporate has already secured $6.7 million in One Gateway orders from 5 clients, with common deal sizes roughly 3 times bigger than typical SmartGateway contracts.
Administration highlighted an enormous addressable marketplace for the One Gateway product, estimating $15 billion to $30 billion in Okay-12 colleges alone, in addition to an extra $8 billion alternative in distribution centres and industrial buildings. The corporate is at the moment bidding on $46 million value of request for proposal (RFP) alternatives and maintains a pipeline of roughly $100 million.
Notably, Xtract One ended fiscal Q3 with a backlog of $36.5 million and is forecast to report income of $30 million in fiscal 2025, representing a 100% year-over-year enhance. The highest line can be projected to achieve $83 million in fiscal 2029.
Xtract One is anticipated to finish 2029 with a free money stream (FCF) of $22 million, in comparison with an outflow of $9.40 million in fiscal 2024. If the TSX tech inventory is priced at instances ahead FCF, it might virtually triple inside the subsequent 4 years.
Is that this TSX tech inventory undervalued?
Vecima Networks (TSX:VCM) develops built-in {hardware} and software program options throughout three segments. Video and Broadband Options supplies platforms that ship web connectivity over cable and fibre networks by means of merchandise like Terrace and Entra. Content material Supply and Storage provides MediaScale options for video ingestion, storage, and streaming companies. The Telematics phase supplies fleet administration analytics beneath the Contigo and Nero International Monitoring manufacturers.
Vecima Networks reported a difficult fiscal 2025, ending June 30, with flat income however vital strategic progress that positions the corporate for future development.
Fourth-quarter income reached $68.8 million, up 7.5% sequentially however down 21% yr over yr, as clients accomplished community improve preparations. It posted a web lack of $0.73 per share for the yr, which was closely impacted by $15 million in non-cash prices.
Administration wrote down sure deferred improvement prices and stock associated to cable and fibre entry options that advanced into extra profitable options.
Adjusted earnings earlier than curiosity, tax, depreciation, and amortization got here in at $28.9 million regardless of international change headwinds from a pointy $0.06 drop within the U.S. greenback versus the Canadian greenback.
The brilliant spot was the Video and Broadband Options phase, which achieved report annual Entra household gross sales regardless of timing delays.
Vecima secured a significant, multi-year vCMTS settlement with Cox Communications, positioning itself as one among solely three distributors worldwide able to serving Tier 1 broadband suppliers with this next-generation know-how. The vCMTS market is forecast to achieve $350 million yearly by 2028.
Analysts forecast Vecima to extend its free money stream to $63 million in fiscal 2030, in comparison with an outflow of $29 million in fiscal 2024. If VCM inventory is priced at 10 instances FCF, it might acquire over 150% from present ranges.
