Canadian tech stocks significantly outperformed the benchmark index and delivered outsized returns in 2020. However, an expensive valuation and an expected normalization in the demand and growth rates took a toll on their stock prices in 2021, as the majority of the TSX-listed tech stocks erased some of their gains.
While the reopening of the economy could drive back some of the spending to the offline retail and services, a few companies remain well positioned to benefit from secular industry tailwinds and could deliver stellar financial and operating performance.
So, if you plan to invest in high-growth tech companies, consider buying these under-$50 Canadian tech stocks.
Dye & Durham
Investors eyeing a high-quality tech stock that they can hold for the long-term should consider buying the shares of the legal tech company Dye & Durham (TSX:DND). It operates a high-revenue and high-margin business and has performed exceptionally well over the past several years. Its stock has jumped about 179% since it listed on the TSX last year and could continue to grow higher in the coming years on the back of its solid fundamentals and robust organic and inorganic growth.
Dye & Durham has a large and diversified active customer base of more than 50,000. Further, it generates most of its revenues from the existing customers. Its revenues are highly diversified and not dependent on few customers. Meanwhile, it has a broad blue-chip client base and a low churn rate.
While its organic business remains strong, its ability to acquire and integrate businesses further strengthens my bullish view. Its strong base business, global expansion, and strong acquisition pipeline suggest that Dye & Durham could continue to drive its revenues and EBITDA at a breakneck pace. Notably, it expects its adjusted EBITDA to more than double in FY21, while it projects more than 100% growth in its adjusted EBITDA in FY22. Its high-growth business and multiple growth catalysts are likely to lift its stock higher in the long run.
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Absolute Software (TSX:ABST)(NASDAQ:ABST) stock is another high-growth tech stock that should be on your buying list. Despite the recent selling in most tech companies, Absolute Software stock is still up about 70% in one year.
The company continues to produce solid revenues and margins. Meanwhile, accelerated spending on cybersecurity threats indicates that the demand for its endpoint security software could remain elevated and drive its stock higher. Its annual recurring revenues have grown at a solid double-digit rate, while the pace of growth has accelerated in the recent past.
I expect Absolute Software to deliver stellar returns in the long term, thanks to its robust annual recurring revenues, strong momentum across all its business divisions, and its growing global footprint. Meanwhile, its solid balance sheet, zero debt, and low direct competitive activity position it well to produce strong growth. Also, its stock is trading cheaper than its peers and is an attractive long-term pick.
WELL Health Technologies (TSX:WELL) stock surged over 193% in one year and could continue to trend higher due to the increased adoption of omnichannel health services and its ability to significantly accelerate its growth rate through acquisitions.
Its top line is growing at a strong double-digit rate, thanks to the astounding growth in its software and services revenues. The momentum in its base business is likely to sustain given the continued demand. Meanwhile, the company expects solid organic growth across its business units.
I believe its growing scale, global expansion, and continued growth in digital and in-person channels could drive its future revenues. Furthermore, its strong acquisition pipeline could continue to solidify its competitive positioning and accelerate its growth rate.
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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.
Fool contributor Sneha Nahata has no position in any of the stocks mentioned.