While the equity markets generally remain volatile in the short term, they are the best asset class to build long-term wealth. Investors should look to buy and hold fundamentally strong companies that have the potential to generate outsized gains and beat the broader market. A few companies on the TSX have lost momentum recently and are attractive for contrarian investors. So, if you have $3,000, consider buying these top TSX stocks today.
The first stock on the list is Canada’s e-commerce giant Shopify (TSX:SHOP)(NYSE:SHOP). Shopify stock is currently trading 25% below its record highs, despite reporting stellar results in Q1 of 2021. The company managed to more than double sales and GMV, or gross merchandise volume, in the first quarter. This allowed Shopify to grow its earnings by an astonishing 11 times in Q1, which shows it benefits from high operating leverage.
While Shopify’s management expects revenue growth to decelerate going forward, analysts have forecast sales to rise by over 50% to US$4.44 billion in 2021 and by 32% to US$5.9 billion in 2022.
Shopify is a growth stock, which means it is valued at a premium. It’s trading at a forward price-to-sales multiple of 32 and a price-to-earnings multiple of 264, which is extremely steep. However, analysts continue to remain bullish on Shopify and have a 12-month average price target of $1,464 on the stock, which is 30% above the current trading price.
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Another TSX growth stock for you to consider is Lightspeed POS (TSX:LSPD)(NYSE:LSPD). This fintech company should benefit from multiple secular industry tailwinds, growing demand for its expanding suite of digital products and services as well as accretive acquisitions that provides a base for outsized growth.
Over the years, LSPD has managed to drive its top line via a combination of inorganic growth and expansion into new markets. The company’s growing scale and strategic buyouts have helped Lightspeed increase its customer base and accelerate revenue growth. Lightspeed has successfully solidified its position in North America and Europe while it continues to gain traction in emerging Asian markets.
LSPD stock is trading 22% below its record high, giving investors an opportunity to buy a quality stock at a lower valuation. Analysts expect Lightspeed to increase sales by 73% year over year to US$210 million fiscal 2021 and by 72% to US$361 million in 2022.
Dye & Durham
The final stock on my list is Dye & Durham (TSX:DND), a company that provides cloud-based software and technology solutions for legal firms, financial service institutions, and governments in Canada and the United Kingdom. Dye and Durham is now looking to expand into other international markets, which will drive sales growth in the upcoming decade.
The company is expected to grow at a stellar pace in the next two years. Analysts expect sales to rise by 169% to $176.3 million in fiscal 2021 and by 110.6% to $371 million in fiscal 2022. These numbers are astonishing when you consider DND reported sales of just $18.8 million in 2018.
Analysts also expect DND to improve its bottom line from a loss per share of $0.26 in 2020 to earnings of $1.02 per share in 2022.
Are you a fan of growth stocks like Lightspeed?
Before you consider Lightspeed POS, you may want to hear this.
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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.
Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. The Motley Fool owns shares of Lightspeed POS Inc. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.