3 Stats to Check Before Buying a TSX Stock

There are three basic stats, among several others, that you should check first before buying a TSX stock. However, growth investors’ interest in BlackBerry stock and Kinaxis stock remains high, even if both don’t pass some metrics.

| More on:
Man holding magnifying glass over a document

Image source: Getty Images.

The TSX is the marketplace to make money, save, or build wealth for the future. Canada’s primary stock exchange is among the global leaders in listed companies. You can invest in companies of all sizes. There are 11 primary sectors, so you can diversify to spread out the risks.

Stock investing is exciting, although you have to be smart. Besides the price, there are stats or metrics you need to check before buying a TSX stock. It would help to be well informed to increase your chances of success.

1. P/E ratio

One of three basic metrics is the price-to-earnings (P/E) ratio. It won’t tell you the prospect’s future earnings, but then it gives you an idea of how much the market is willing to pay for the stock based on past earnings.

2. 52-week high and low

Reviewing a stock’s 52-week high and low tells the range within which the price fluctuates — peak or bottom. Some investors rely on this stat to determine entry and exit points. Others compare them with analysts’ forecasts to see return potentials, whether positive or negative.

3. Free cash flow

Free cash flow (FCF) could be the determining factor when choosing stocks. It shows if the company has leftover cash to cover operating costs and meet capital expenditure requirements. Likewise, it indicates the ability to service debts or sustain payouts for dividend-paying companies.

High-growth stock

BlackBerry (TSX:BB)(NYSE:BB) is among the actively traded stocks on the TSX. The average volume in the last 10 trading days was 3.3 million. Many investors consider the former smartphone maker and now an intelligent security software provider a high-growth stock.

The tech stock’s 52-week high is $36, while the 52-week low is $5.82. BlackBerry trades at $13.58 per share, or a trailing one-year price return of 109.89%. However, analysts’ 12-month average price target is $7.64, which is a potential 44% drop from its current price.

The unfavourable forecasts stem from BlackBerry’s dropping revenues in four of the last five quarters, including Q1 fiscal 2022. In the quarter ended May 31, 2021, revenue fell 16% to US$174 million versus Q1 fiscal 2021. Net loss, however, decreased 90% to US$63 million. Still, BlackBerry remains on investors’ radars with its focus on cybersecurity and the Internet of Things, plus several key partnerships.

Overvalued cloud-computing stock

Kinaxis (TSX:KXS) carries a strong buy rating notwithstanding the high P/E ratio (1,006.61 five-year average). While the tech stock is overvalued ($200.78 per share), investors are willing to pay more because the growth potential of cloud computing stocks is massive.

The $5.47 billion company from Ottawa provides cloud-based subscription software for critical supply chain operations. However, if cash flow generation is your gauge, Kinaxis isn’t attractive. In the first half of 2021, the company reported an 89% decline in profits.

Furthermore, and because of lower profits, the cash generated from operating activities fell 31% to US$35.7 million. Kinaxis follows a subscription model where the proportion of recurring revenue should be high. Despite the unimpressive financial results, management expects to end 2021 with 17-20% growth in Software-as-a-Service revenue.

Basic metrics

Other statistics are available for investors to chew on. The P/E ratio, 52-week high and lows, free cash flow are some of the basics. BlackBerry and Kinaxis may not pass in some essential metrics, yet both are on the shopping lists of growth investors.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends BlackBerry and KINAXIS INC.

More on Tech Stocks

A data center engineer works on a laptop at a server farm.
Tech Stocks

Psst … 2 Tech Stocks I’d Buy Before Shopify

Shopify (TSX:SHOP) stock is great -- don't get me wrong. But these two tech stocks are great too, with more…

Read more »

Technology, internet and networking, security concept
Tech Stocks

1 Top Canadian Cybersecurity Firm on the Frontline Against Cyber Threats

Here’s the best Canadian cybersecurity stock you can buy now to benefit from the expected significant surge in demand for…

Read more »

Credit card, online shopping, retail
Tech Stocks

Should You Buy Lightspeed Stock After Its Q4 Earnings?

Despite its volatility, I expect Lightspeed to outperform in the long run due to its healthy growth prospects and cheaper…

Read more »

Shopping and e-commerce
Tech Stocks

Shopify Stock: Is $100 the Next Stop?

Shopify (TSX:SHOP) stock may be headed to the $100 level over the longer term if things fall into the right…

Read more »

Young woman sat at laptop by a window
Tech Stocks

Open Text’s Cloud Kingdom: A SaaS Stock for the Long Haul?

Here's why Open Text (TSX:OTEX) could indeed be a software-as-a-service stock that long-term investors may want to consider right now.

Read more »

clock time
Tech Stocks

Is Now the Right Time to Buy Shopify Stock?

Amid another dip, Shopify stock might be worth buying right now for investors who missed the post-earnings surge.

Read more »

Tech Stocks

Is BlackBerry Stock a Buy for June 2023?

Given its multiple growth drivers, I expect the uptrend in BlackBerry’s stock price to continue.

Read more »

Index funds
Tech Stocks

1 Canadian Tech Stock I’d Buy Before Shopify Stock

Shopify stock is still a good option, but this other tech stock could be even better, especially as it's up…

Read more »