As the latest corporate earnings season has already started, many Canadian companies are preparing to announce their latest quarterly results this week. These earnings will help investors set realistic future growth expectations from these companies for 2021 and beyond. That’s why investors and analysts will be watching these earnings closely.
Many companies from the tech industry have seen remarkable growth in the last year, despite the global pandemic. Here are two major TSX tech companies releasing their earnings later this week. You might want to keep a close eye on their stocks for a pullback to buy them cheaper.
Open Text stock
Open Text (TSX:OTEX)(NASDAQ:OTEX) is a Waterloo-based enterprise software company. Its software solutions mainly focus on business data and content management services. The company provides these solutions mainly through the cloud and on-premises deployment.
While Open Text’s licence segment revenue has gone down in the last couple of years, its recently launched cloud services and subscriptions have kept a positive trend in its total revenue going. This new revenue source has helped the company report positive YoY (year-over-year) sales growth in the last four consecutive quarters. In the quarter ended September 2020, it rose to US$804 million — significantly higher from its revenue of US$697 million in the same quarter of the previous fiscal year.
Similarly, Open Text’s adjusted net profit margin has been expanding sequentially for the last three quarters in a row. In the first quarter of fiscal 2021, the company reported a 30.1% adjusted net profit margin — far better than 24.9% a year ago.
Open Text will release its Q2 of fiscal 2021 earnings on Thursday. Analysts expect the company’s positive earnings growth trend to continue. It’s expected to report adjusted earnings of US$0.85 per share in Q2 2021 — slightly higher compared to US$0.84 per share in Q2 2020.
Despite Open Text’s consistently improving sales and profitability, its stock price didn’t see much appreciation last year. Its stock ended in 2020 with just a 1% gain. That’s why I find it to be cheap and expect its stock to perform well in 2021.
Lightspeed POS stock
Lightspeed POS (TSX: LSPD)(NYSE:LSPD) is another great Canadian business software company. It has a much smaller market cap of about $10.9 billion compared to Open Text’s $16.1 billion. Nonetheless, it saw much stronger financial growth in the last year than its bigger peer. Lightspeed’s YoY sales growth rate has been between 51% and 62% in the last couple of quarters. In the second quarter of fiscal 2021, its adjusted gross profits also jumped by 49% YoY to $27.5 million — with a strong margin of 60%.
Despite the pandemic-related challenges, Lightspeed continued to acquire small enterprise software companies in the last year to further expand its business. It has acquired two fast-growing cloud commerce platform providers ShopKeep Inc. and Upserve Inc in the last three months.
These acquisitions are likely to accelerate Lightspeed’s financial growth — especially sales growth — this year. That’s why analysts expect an ongoing positive trend in Lightspeed’s sales and gross profits to strengthen further going forward. In the last year, its stock has more than doubled with about 112% gains. I expect these positive factors to help the Lightspeed stock rally to continue in 2021.
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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.
The Motley Fool owns shares of Lightspeed POS Inc. The Motley Fool recommends Open Text and OPEN TEXT CORP. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.