Although the Canadian equity markets have rebounded strongly from their last month’s lows, the fear of aggressive interest rate hikes and the inflationary environment could put pressure on the equity markets in the coming days. However, if you are a beginner with a longer investment horizon, you should not worry about these fluctuations and go long on quality stocks. With that objective in mind, here are my three top picks.
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Telus
The pandemic has accelerated the digitization of business processes and increased the adoption of remote working and learning, thus driving the demand for faster and reliable internet services. Meanwhile, the increased penetration of mobile devices and 5G revolution have created multi-year growth potential for telecommunication service providers, including Telus (TSX: T)(NYSE: TU).
Supported by its accelerated capital expenditure program, which will end this year, the company has strengthened its PureFibre and 5G networks. It currently provides PureFibre service to 2.8 million locations while covering 78% of Canadians with its 5G service. Amid these investments and strong performance from its high-growth verticles, the telecom continues to deliver solid quarterly results. Revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by 7.1% and 8.9% in the June-ending quarter, respectively. The company added 247,000 new customers during the quarter.
As part of its diversification strategy, Telus recently acquired LifeWorks, strengthening its capabilities in the digital healthcare space. Additionally, the momentum in its TELUS International and TELUS Agriculture & Consumer Goods could continue to drive its growth in the coming quarters. Plus, the company pays a quarterly dividend of $0.3386/share, with its yield for the next 12 months at 4.49%. Its NTM (next 12 months) price-to-earnings multiple stands at 22.7, compared with a forward PE of 45 for the wireless telecom sector, making it an intriguing buy.
Nuvei
The digital payments segment has witnessed robust growth over the last few years due to e-commerce growth. The momentum could continue amidst increased adoption of online shopping and growing internet penetration. Analysts expect the global digital payments market to grow in double digits over the next five years. With Nuvei (TSX: NVEI)(NASDAQ: NVEI) supporting 150 currencies and 570 alternative payment methods (APM), it is well-positioned to benefit from the expansion.
The company is expanding its APM portfolio, venturing into new markets, growing its customer base, and increasing its headcount, which could drive its growth in the coming quarters. Nuvei also has a substantial presence in the sports betting and iGaming industry, which is growing as these markets continue to legalize. So, its growth prospects look healthy. However, amidst the recent selloff in the tech space, Nuvei lost 77% of its stock value from its 52-week high, while its NTM price-to-earnings stands at an attractive 17.
goeasy
With the improvement in economic activities since the easing of pandemic-infused restrictions, loan originations have improved, benefiting goeasy (TSX: GSY). In the recent second quarter, the company witnessed record loan originations of $628 million, representing year-over-year growth of 66%. Its stable credit and payment performance drove its financials, with its revenue and adjusted EPS growing by 24% and 8%, respectively.
Supported by strong organic growth and the acquisition of LendCare, goeasy’s loan portfolio increased to $2.4 billion. Forecasting strong growth, the company has raised its guidance for the next three years. Management expects its loan portfolio to reach $4 billion by the end of 2024, representing growth of 68% from its June 30 levels. Along with top-line growth, the operating margin could also improve by 100 basis points annually. So, given its healthy outlook and an attractive NTM price-to-earnings of 9.8, I am bullish on goeasy
