The Motley Fool

3 TSX Stocks That Could Soar After Q1 Earnings Next Week

Image source: Getty Images

TSX stocks at large are already up more than 10% this year. Canadian markets could keep on trading strong on superior earnings growth this season. Many bigwigs are lined up for their first-quarter earnings release next week. Here are three of them that will likely continue their growth streak next week.

Constellation Software

One of Canadian investors’ favourite stocks is Constellation Software (TSX:CSU), which will report its first-quarter earnings on May 5. The stock is already trading close to its record levels. However, its decent quarterly performance could continue to drive the stock higher.

Constellation Software is a $39 billion tech giant that operates a fleet of vertical market software companies. It acquires smaller, profitable tech companies that have a leading market share in their particular domain. Analysts expect its Q1 revenues to come over $1.1 billion against $953 million in the year-ago quarter.

In January 2021, Constellation Software acquired a Netherlands-based vertical market software company Topicus B.V.

Since 2016, the company has increased its earnings by over 20% compounded annually. Its strong financial performance translated in the stock performance. CSU stock returned 250% in the last five years, notably beating TSX stocks at large.

Consistent profitability, a strong balance sheet to fund new acquisitions, and a dominant presence in the niche markets make Constellation Software an attractive investment.

Spin Master

Spin Master (TSX:TOY) shares exploded almost 25% after its last quarterly results in early March. The company reported significantly higher profits in Q4 2020 due to operational improvements and cost efficiencies.

Will it continue the similar performance this quarter as well?

Spin Master, a $4 billion children’s entertainment company, will report its first-quarter results on May 5. According to analysts, the company will report revenues of around $273 million, approximately 20% higher year over year.

Spin Master’s digital sales will be vital to watch next week. In the last quarter, they surged 405% year over year, driven by an increased subscriber base. Also, the company’s gross margins improved last quarter, thereby boosting the stock. If a similar performance continues, we can see the stock move further higher.

However, Spin Master stock’s valuation could hinder its upward move from its current levels. The stock already looks stretched and might have a limited upside.

Cineplex

The theatre chain operator Cineplex (TSX:CGX) will report its Q1 2021 earnings on May 6. There will likely be a disappointment again on the Q1 revenues and earnings front due to continued restrictions. What’s important to watch is Cineplex’s cash burn and liquidity position. These numbers will largely decide the fate of the company.

Cineplex had a cash balance of $16 million at the end of Q4 2020. Notably, it burned around $74 million during the same quarter. Considering things did not meaningfully change in Q1 2021, its liquidity position could have notably deteriorated further. The management commentary will be crucial for CGX stock, which is up almost 45% so far this year.

The stock could soar higher on speculative buying ahead of its earnings. However, CGX looks like a risky bet at the moment. There are still a lot of uncertainties regarding the re-openings and the pandemic. How the company manages its fast-depleting cash until a full re-opening remains to be seen.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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 Vineet Kulkarni has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Software and Spin Master. The Motley Fool recommends CINEPLEX INC.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.