3 Tech Companies to Watch

Cantech Investment Conference yields some attractive stock ideas.

The Motley Fool

If you look at a list of Canada’s top 10 technology companies (by market capitalization) from March 2000, how many of those 10 would still be on the same list today?

The answer is three: Blackberry (TSX:BB), Celestica (TSX:CLS), and CAE (TSX:CAE). Such is the nature of technology — things change so quickly that once-great companies can easily be left in the dust. It’s no wonder that so many great investors avoid the sector altogether.

In Canada, there seems to be a particular lack of enthusiasm towards the tech sector – perhaps many investors still have bad memories from Nortel or Blackberry. Predictably, access to capital is often cited as a number-one concern among Canadian tech companies, and selling out to Google becomes a much more attractive option than going public.

In 2013, the tide started to turn. The Canadian technology sector outperformed the broader market, returning 36%, and investor interest picked up. Difference Capital chairman Michael Wekerle pointed out that many investment bankers and analysts who were once committed to natural resources slowly shifted into sectors such as technology. Trading volume in technology stocks increased by 19% in 2013, 46% when measured by dollar value traded.

Thus it seemed like the perfect time for Cantech, a Canadian technology newsletter, to hold its first-ever investment conference, featuring speeches from a wide variety of Canadian technology companies. A few companies stood out.

One of these was QHR Corporation (TSXV:QHR), a provider of software for the healthcare industry, in particular electronic medical records. QHR offers a perfect case study of what investors should look for in a technology company.

The company has high recurring revenue (78% of the total) with renewal rates above 95%. QHR also has a diversified revenue base with over 25,000 users. The company is the leader in a very fragmented market, meaning it has a very long runway for growth and is in a great position to consolidate the industry.

QHR has been able to grow revenues at 46% per year since 2008, and investors seem to have caught on. The company’s shares have returned 162% over the past 12 months alone.

A company with similar characteristics is GuestLogix Inc. (TSX:GXI). GuestLogix provides technology for travel operators, with a focus towards onboard revenue. The company has a 90% airline market share in North America, and like QHR, it has high recurring revenue. Unlike QHR, its revenue growth has not been as strong – essentially flat over their past three fiscal years – although its shares are still up 30% over the past year.

No tech investment conference would be complete without companies that have very innovative technologies but no revenues. For investors who like to make those kinds of bets, the most interesting presentation came from UrtheCast (TSX:UR). This company has mounted cameras on the Russian side of the International Space Station, and will be selling HD video of Earth to data partners in natural disaster relief, agricultural monitoring, and other sectors.

The highlight of the conference came at the end of the day with Canadian astronaut Chris Hadfield’s incredible speech about his expedition to the space station last year. It was the perfect way to cap off such a conference.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no positions in any of the stocks mentioned in this article.

More on Investing

A worker gives a business presentation.
Dividend Stocks

TSX Communications in April 2024: The Best Stocks to Buy Right Now

Here are two of the best TSX communication stocks you can buy in April 2024 and hold for years to…

Read more »

Man holding magnifying glass over a document
Tech Stocks

Watching This 1 Key Metric Could Help You Beat the Stock Market

One key metric that Buffett looks at is the return on equity. Here's why you should watch it.

Read more »

Man considering whether to sell or buy
Dividend Stocks

Royal Bank of Canada Stock: Buy, Sell, or Hold?

Royal Bank of Canada (TSX:RY) has a high dividend yield. Should you buy it?

Read more »

oil tank at night
Energy Stocks

Is Suncor a Buy, Sell, or Hold?

Suncor Energy stock is off to a strong start in 2024. Is the TSX energy stock a good buy right…

Read more »

Daffodils in bloom
Tech Stocks

2 Best “Magnificent Seven” Stocks to Buy in April

Two surging mega-cap tech stocks are the best buys among the “Magnificent Seven” this April.

Read more »

A golden egg in a nest
Stocks for Beginners

Got $5,000? 5 Stocks to Buy for Lasting Wealth

Got $5,000 to build a long-term compounding stock portfolio? Here are five top Canadian stocks to building lasting lifetime wealth.

Read more »

Businessman looking at a red arrow crashing through the floor
Dividend Stocks

BCE’s Stock Price Has Fallen to its 10-Year Low of $44: How Low Can it Go?

BCE stock price has dipped 39% in two years and shows no signs of growth in the next few months.…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

Invest $10,000 in This Dividend Stock for $3,974.80 in Passive Income

This dividend stock gives you far more passive income than just from dividends alone, so consider it if you want…

Read more »