Hot Canadian stocks that are at all-time highs get a pretty bad rap. They’re perceived to be overvalued, overdue for a correction or a nasty meltdown. In some instances, value-conscious investors are right to be wary of such high flyers. That said, not all names at fresh all-time highs should be shunned. In fact, by passing up on the winners positioned to keep on winning, investors, even the most value oriented of us could leave big money on the table.
Winners tend to keep on winning. These days, there’s a high premium to pay for the “sexiest” winners out there. Many such names have market values that are well above their intrinsic value ranges. Still, there are Canadian stocks at new highs with seemingly frothy multiples that may not be nearly as expensive as they could be, given their favourable long-term fundamentals.
Still a buy at an all-time high?
Add in a near-term catalyst or two, a stellar macro backdrop, and needle-moving wildcard projects, and you could have a stock that’s a buy at an all-time high. Enter Shopify (TSX:SHOP)(NYSE:SHOP) and TFI International (TSX:TFII)(NYSE:TFII), two stocks that recently touched new all-time highs but are well positioned to continue moving higher.
Based on traditional valuation metrics, then sure, both names may be a tad frothy. But when you consider the magnitude of growth that could surpass even the most bullish of estimates on the Street, it becomes more apparent that both names aren’t as overvalued as their multiples or recent action suggest.
Shopify: Buy high and sell higher!
When it comes to Shopify, you’re unlikely ever to pay a multiple that’s below nosebleed level. But that’s okay. Why? Shopify has jumped over the bar many times, impressing and even defying the odds. While profitability prospects may be in the distant future, the company’s growth trajectory suggests that the company can grow into its lofty double-digit price-to-sales (P/S) multiple.
In fact, there are unforeseen growth outlets that warrant for an even higher P/S multiple! It’s tough to tell evaluate fast-moving growth stocks with precision, but it is still important that investors try to gauge a stock’s intrinsic value. All traits considered, I think Shopify stock is a winner that may very well continue winning for years to come.
The company has an exceptional founder-led management team, a lightly penetrated total addressable market in its corner of e-commerce, and an innovative platform with a sizeable (and growing) moat. Could a name like Shopify stumble along the way? Sure, but long-term investors should relish such stumbles as a chance to buy more shares for lower prices.
TFI International: Backing up the truck at new highs?
TFI International is a less-than-load (LTL) trucker that also happens to be one of my favourite transportation plays on the planet. Trucking may be boring, but it’s essential, especially in a booming economy. The Canadian stock is now up over 325% from its March 2020 low, and I still think there’s room to fly, as the firm feels the full force of the winds to its back.
In the first quarter of 2021, TFI blew away the numbers. LTL numbers were off the charts, crushing analyst expectations. Although the stock has surged considerably since its past few blowout quarters, I still view shares as cheap. TFI trades at 2.1 times sales and 4.8 times book. It’s not exactly an expensive stock, even though the name is near a fresh all-time high.
TFI is at an all-time high for a very good reason. And I believe that may not fully be reflected in the stock just yet. My takeaway? Back up the truck.
Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify.