The global equity markets have been volatile in the last few days amid concerns over rising yields and higher valuations. Despite the volatility, I believe these four Canadian stocks to deliver superior returns in 2021.
Air Canada
Air Canada (TSX: AC) has witnessed a strong buying since the beginning of February, with its stock price rising 32.8%. However, the company is still trading over 45% lower than its all-time high, providing an excellent buying opportunity. The delay in the widespread vaccine distribution could also delay the recovery in demand for air travel.
However, Canadian households are sitting on a considerable amount of cash, which they saved for an emergency. With the improvement in economic activities and the decline in the unemployment rate, Canadians could spend their savings on travel and leisure, benefitting Air Canada. Further, the company’s long-awaited acquisition of Transat A.T. could capture a significant market share in the leisure travel market. Air Canada’s valuation also looks attractive, with its forward price-to-sales multiple standing at 1.2.
Cineplex
The pandemic-infused lockdown led to the closure of theatres and entertainment venues, which has hurt Cineplex’s (TSX: CGX) financials. In its recently announced fourth-quarter results, the company’s top line declined by 88.2%. It reported net losses of $230.4 million compared to net profits of $3.5 million in the previous year’s quarter. However, the company has taken several initiatives to reduce its expenses, such as lowering its headcount and renegotiating the rent payments, bringing its operating losses down in the coming quarters.
Further, Cineplex has raised $57 million by selling and leasing back its headquarters and $60 million from Scotiabank by expanding its loyalty program. Further, the widespread distribution of vaccines could prompt the government to lift restrictions, boosting the company’s financials. Amid the improvement in economic activities, I believe the upward momentum in Cineplex’s stock price could continue.
Suncor Energy
The announcement from OPEC countries not to increase their production levels until April and recovery in oil demand due to improved economic activities have pushed oil prices to a 12-month high. The rising oil prices could benefit Suncor Energy (TSX: SU)(NYSE: SU). The company has returned around 26% this year.
However, I believe the company’s stock price could rise further, given its attractive valuation, improvement in operating metrics, and the expectation of oil prices to remain at elevated levels for some time. For 2021, the company’s management expects its production to increase by 10%, while its refineries utilization rate could increase by 6%. Meanwhile, its operating expenses could fall, improving its margins.
Despite its recent surge, Suncor Energy still trades over 22% lower than its 52-week high. Further, its valuation looks attractive, with its price-to-book and forward price-to-sales multiples standing at 1.1 and 1.3, respectively. The company also pays quarterly dividends of $0.21 per share, representing a forward dividend yield of 3.1%.
Waste Connections
Waste Connections (TSX: WCN)(NYSE: WCN) is mostly immune to economic downs, given its business nature. It operates in secondary or exclusive markets, which allows the company to maintain its margin. Further, its disposable sites are closer to the waste sources, reducing its operating expenses and providing a competitive edge.
In its recently reported fourth-quarter earnings, Waste Connections’s top line and adjusted EBITDA increased by 2.6% and 1.8%, respectively. Meanwhile, its adjusted EPS declined marginally from $0.69 to $0.68. Further, the company’s management has set a promising 2021 outlook, with its top line and adjusted EBITDA projected to increased by 6.5% and 8.3%, respectively. The management also expects the company to generate $950 million of adjusted free cash flow in 2021. It pays quarterly dividends of $0.205 per share, representing a forward dividend yield of 0.7%.
