After making a bright start to 2023, the Canadian equity markets have been under pressure over the last few weeks amid the banking crisis, rising interest rates, and stick inflation. The Canadian benchmark index, the S&P/TSX Composite Index, has lost around 5.8% compared to its February highs. Despite the weakness in the broader equity markets, I am bullish on the following two Canadian stocks due to their solid financials and high-growth prospects.
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Nuvei
Nuvei (TSX: NVEI) posted a solid 2022 performance earlier this month. The new product launches, expansion into new markets, and addition of new APMs (alternative payment methods) led to volume expansion, with its total volume growing by 34%. Supported by solid volume growth, the company’s revenue and adjusted net income increased by 16% and 10%, respectively.
Meanwhile, Nuvei also repurchased around 3.66 million shares for $167 million last year. The company’s financial position also looks solid, with its cash balance at $752 million. So, it is well equipped to fund its growth initiatives.
The growth in e-commerce has made digital payments popular, thus creating a multi-year growth potential for Nuvei. The acquisition of Paya Holdings in February for $1.3 billion would expand its presence in underpenetrated and non-cyclical verticals. So, the company’s growth prospects look healthy.
Meanwhile, the company’s management expects its revenue to grow at an annualized rate of 20% in the medium term. Also, the management hopes to increase its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) by over 50% in the long term. Meanwhile, amid the challenging macro factors, the company trades at a discount of over 67% from its all-time high. Also, its NTM (next 12-month) price-to-earnings multiple has declined to 19.9, making it an attractive buy.
WELL Health Technologies
WELL Health Technologies (TSX: WELL) is a small-cap digital healthcare company that aids healthcare practitioners in providing virtual services to patients. Despite the challenging macro environment, the company posted a solid 2022 performance last year. It achieved a record of 3.5 million omnichannel patient visits and 4.9 million patient visits last year. Meanwhile, its revenue and adjusted net income grew by 88% and 228%, respectively.
The strong performance from its higher-margin virtual services drove its revenue and gross margins. The company also generated an adjusted EBITDA of $104.6 million, representing year-over-year growth of 73%.
Meanwhile, I expect an uptrend in WELL Health’s financials to continue as the global telehealthcare services market could grow at an annualized rate of over 20% for the rest of the decade. Supported by its strong cash flows, the company continues to expand its footprint in the United States and Canada through strategic acquisitions. It also recently made some strategic investments in doctorly GmbH, which could help the company expand its footprint in Germany.
Meanwhile, amid the weakness in growth stocks due to rising interest rates, WELL Health trades at over 50% lower than its all-time high. The selloff has dragged its valuation down, with its NTM price-to-earnings multiple declining to 16.6, making it an attractive buy.
