This year has been good for the Canadian equity markets, with the benchmark index, the S&P/TSX Composite Index rising 15.5%. Improving corporate earnings and optimism over the reopening of the economy have driven the equity markets higher. Amid increased investors’ confidence, here are four Canadian stocks that can outperform the broader equity market this year.
After delivering an impressive return of 149.1% last year, Lightspeed POS (TSX:LSPD)(NYSE:LSPD) has continued its uptrend, with its stock price trading 6.6% higher. Meanwhile, the secular shift to online shopping, growth in the demand for omnichannel solutions, and its strategic acquisitions have created long-term growth prospects for the company.
Since the beginning of last year, the company has carried out several acquisitions, which have expanded its footprint to over 100 countries. Besides, the company is continuing with its M&A acquisitions.
Currently, it is working on the acquisition of Ecwid and NuORDER. These acquisitions could further boost its e-commerce business. So, given the favourable business environment and its strategic acquisitions and growing financials, I am bullish on Lightspeed POS.
Although Air Canada (TSX:AC) has returned 23.2% since the beginning of this year, it still trades 42.2% lower than its January 2020 levels. However, the ongoing vaccination drive and falling COVID-19 cases could prompt governments worldwide to ease travel restrictions soon. Besides, the economic expansion and the pent-up demand could drive passenger demand, benefiting Air Canada.
Despite the pandemic, the company’s cargo business continues to accelerate. So, amid the rising demand, the company has planned to add two more of its retired passenger aircraft to expand its cargo operations to international routes. Meanwhile, the company expects more aircraft to join its fleet next year.
Given its large scale, strong balance sheet, and cost-cutting initiatives, I expect Air Canada to bounce back quicker than its peers. So, Air Canada could be an excellent buy at these levels.
After bottoming out in March 2020, goeasy (TSX:GSY) has bounced back strongly to delivered impressive returns of 619% since then. Despite the substantial rise, its valuation still looks attractive, with its forward price-to-earnings standing at 14.7.
Meanwhile, the gradual reopenings of the economy could drive the demand for its service. Besides, the company’s expanded product offering, expanding footprint, and omnichannel model bode well with its growth prospects.
Further, in April, goeasy acquired LendCare Holdings for $320 million. The acquisition could accelerate goeasy’s growth prospects in the consumer credit market by expanding its product ranges and point-of-sale distribution platform.
So, the company’s growth prospects look healthy. Besides, the company also rewards its shareholders by raising its dividends consistently. Since 2014, the company has increased its dividends at a compound annual growth rate of 34%. Currently, its forward dividend yield stands at 1.75%.
Cineplex (TSX:CGX) has witnessed a strong buying this quarter, with its stock price rising 37.5%. Despite the rise, the company still trades significantly lower than its pre-pandemic levels, providing an excellent buying opportunity.
Amid the pandemic-induced restrictions, the company’s financials had taken a severe beating. However, with the gradual reopening of the economy, I expect the company’s financials to improve sequentially in the coming quarters. Further, the pent-up demand and the postponement of movie releases from last year to this year could also drive theater attendance, boosting its financials.
Meanwhile, the company has strengthened its balance sheet by raising funds through debt and selling and leasing back its headquarter. So, Cineplex is well-equipped to ride out this crisis while delivering superior returns.
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.
The Motley Fool owns shares of and recommends Lightspeed POS Inc. The Motley Fool recommends CINEPLEX INC. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.