Have $2,000? 2 Cheap Canadian Tech Stocks to Buy Now

The two-pronged growth strategy of these tech companies positions them well to report solid double-digit growth in the top line.

| More on:
stock analysis

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Shares of most tech companies listed on the TSX index went through the roof in 2020, as the pandemic accelerated the demand for their products and services. However, the expected normalization in growth rate and expensive valuations led to selling in top-tier tech stocks, providing a solid buying opportunity for long-term investors. 

We’ll focus on two such Canadian tech stocks that could continue to deliver robust growth irrespective of the easing of lockdown measures. Their two-pronged growth strategy, including organic growth and acquisitions, position them well to report solid double-digit growth in the top line. Notably, these stocks have witnessed a healthy pullback and are trading cheap at the current price levels. 

Enghouse Systems 

Shares of Enghouse Systems (TSX:ENGH) have appreciated over 1,110% in 10 years and made its investors very rich. The solid growth in its stock is backed by its stellar financial and operating performance. Meanwhile, strategic acquisitions bolstered its growth rate further and supported the uptrend in its stock. 

Notably, Enghouse’s revenues have grown at a CAGR of 10.4% in the past five years. Meanwhile, its adjusted EPS increased at a CAGR of 17.2% during the same period. Thanks to its high-quality earnings, Enghouse raised its dividends at a CAGR of 13.5% in the last five years. 

Enghouse stock has decreased by about 35% from its 52-week high and is trading at a next 12-month EV/Sales multiple of 5.2. The stock is looking attractive at the current price levels and is offering good value. I believe the continued momentum in the base business, strong operating cash flows, no debt balance sheet, and strategic acquisitions are likely to support its revenues and EPS and drive its stock higher. 

Dye & Durham

Dye & Durham (TSX:DND) stock skyrocketed after listing on the TSX last year. However, it has reversed some of its gains, providing a good buying opportunity. Its next 12-month EV/sales multiple of 8.5 is significantly below the historical levels. Meanwhile, its revenue and adjusted EBITDA continue to grow at a breakneck pace, which will likely drive its stock higher.  

Notably, Dye & Durham’s high-growth and high-margin business are performing exceptionally well, reflecting solid growth in the base business and benefits from its strategic acquisitions. Its diversified and large active customer base, increased revenues from the existing customers, and high retention rate suggest that the company is likely to deliver strong growth in the coming years. 

Furthermore, its robust acquisition pipeline, growing international footprint, up-selling, long-term contracts, and revenue diversification are likely to support the uptrend in its stock. Dye & Durham’s re-occurring revenues are growing at a CAGR of 97%. Meanwhile, the company projects its adjusted EBITDA to increase rapidly over the next two years and help the company to continue to pursue high-growth opportunities.

Bottom line

The two-pronged growth strategy of both these Canadian tech companies positions them well to outperform the benchmark index and deliver stellar returns consistently. I believe the recent pullback in these companies provides a solid buying opportunity. If you have $2,000 to invest, consider buying these high-growth companies at the current price levels. 

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. The Motley Fool owns shares of and recommends Enghouse Systems Ltd.

More on Tech Stocks

clock time
Tech Stocks

Now’s the Time to Load Up the TFSA With These 2 Top TSX Stocks

Here are two top TSX stocks that long-term growth investors may not want to give up on, especially at these…

Read more »

shopping online, e-commerce
Tech Stocks

Shopify (TSX:SHOP) Stock Recovers 30% From its 3-Year Lows: Should You Buy?

Shopify stock: Should you buy the dip or wait for more weakness?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

What Market Correction? 2 High-Growth Tech Stocks That Are on the Rise

I don’t think it will be long before these two Canadian tech stocks are back to delivering market-crushing returns.

Read more »

grow dividends
Tech Stocks

Why Kinaxis (TSX:KXS) Stock Jumped 14% Last Week

Kinaxis Inc. (TSX:KXS) stock popped over the past week after adding yet another big company to its impressive stable.

Read more »

potted green plant grows up in arrow shape
Tech Stocks

TFSA Investors: Double Your Investments With These 3 Top Growth Stocks

Despite the volatility, I am bullish on these three stocks, given their solid growth potential.

Read more »

Arrow descending on a graph
Tech Stocks

2 Industries That Saw the Worst Decline Last Month

The TSX has been declining at a sharp angle since the beginning of June. And two industries (crypto and cannabis)…

Read more »

Dividend Stocks

TFSA Investors: Turn $1,000 Into $10,000 in 10 Years

10-fold growth within a decade is rare but not unheard of. You can capture this growth either by predicting a…

Read more »

Growth from coins
Tech Stocks

Got $1,000? Buy These 3 Under-$20 Growth Stocks to Earn Higher Returns

These under-$20 growth stocks can deliver solid returns in the long run.

Read more »