The TSX’s heavyweight sectors, financials and energy, continue to experience strong headwinds thus far in 2023. However, oil companies could gather steam if prices become steady due to supply tightness. Meanwhile, the big banks’ earnings in the first quarter (Q1) of fiscal 2023 were materially down while loan loss provisions increased.
Nonetheless, if I invest in growth stocks this month, I’d still pick one from each sector. Canadian Western Bank (TSX:CWB) and Ensign Energy Services (TSX:ESI) are better performers than their larger industry peers.
Strong full-service growth
CWB isn’t a Big Six bank, but it deserves serious consideration. The $2.56 billion full-service financial institution’s strategic focus is on businesses and business owners. Performance-wise, the bank stock is up 10.78% year to date. Also, at $26.65 per share, the dividend offer is an attractive 4.6% (low payout ratio of 35.99%).
In Q1 fiscal 2023 (quarter ended January 31, 2023), common shareholders’ income increased 39% to $94 million versus Q1 fiscal 2022. Notably, CWB’s provision for credit losses (PCLs) on total loans as a percentage of average loans decreased by 20 basis points year over year.
Its president and chief executive officer Chris Fowler said, “Execution of our winning strategy and demonstrated history of earning new relationships through economic cycles supports our expectation that we will deliver strong full-service growth this year. Gross impaired loans are returning to more normal levels from very benign conditions last year.”
As of this writing, the combined PCL of the country’s six largest banks is more than $2.4 billion. The spike is in preparation for an anticipated recession in Q2 or Q3 2023. But Fowler expects the PCL level to remain within a strong historical range, because of the CWB’s secured lending model and disciplined underwriting processes.
Lastly, CWB is a Dividend Aristocrat, owing to 30 consecutive years of dividend increases. No big bank can match the incredible feat of this dividend grower. The board of directors approved a 7% dividend hike from a year ago.
Continuing momentum
Ensign Energy Services outperforms the broader market (+5.83%) and the energy sector (+2.92%) year to date. At $3.94 per share, current investors have a positive gain of 15.54%. Market analysts covering the small-cap stock have a 12-month average price target of $6.11 (+55.1%).
The $723 million company isn’t an oil and gas producer but provides vital oilfield services to North America and international clients. markets. Ensign’s business has low fixed costs but high variable costs.
Besides drilling (including directional) and well servicing, Ensign delivers comprehensive technology solutions for drilling challenges, drilling performance optimization, crew safety, equipment reliability, and rig processes.
In the full-year 2022, Ensign reported impressive financial results. Total revenue increased 58% year over year to $1.57 billion. It was also a turnaround year, as net income reached $8.12 million compared to the $159.5 million net loss in 2021. The drilling operating days increased 51% from a year ago, while well servicing operating hours jumped 30%.
According to management, there’s continuing momentum, as revenue and activity have surpassed pre-pandemic performance. Ensign will also deploy free cash flow to debt reduction.
Excellent for growth investing
CWB and Ensign Energy are not the top names in their respective sectors. However, both stocks are great options for growth investors.
