Will the Bank of Canada keep interest rates unchanged in the next policy meeting on June 7, 2023? It appears that eight rate hikes, seven in 2022 and one this year, are enough to bring inflation down. While the central bank’s rate hike campaign is working, Governor Tim Macklem said interest rates would remain at 4.5% until inflation nears 2%.
Meanwhile, investors’ sentiment seems to be changing from bearish to bullish, as evidenced by the TSX’s 6.19% year-to-date gain, with 10 of 11 primary sectors, except energy, in positive territory. If a bull market is coming soon, Payfare (TSX: PAY) and Crescent Point Energy (TSX:CPG) should be on your buy list.
The fintech stock is on a roll with plenty of upside potential, while the energy stock hasn’t lost much this year despite declining oil prices. Both stocks have buy ratings from market analysts.
Significant opportunities ahead
Payfare’s gain since trading on the TSX in March 2021 (+12.8%) isn’t so much, but it has the makings of a high-growth stock. At $6.77 per share, the year-to-date gain is 57.8%, and market analysts’ 12-month average forecast is $12.33, or an 82.1% return potential. What makes the stock an exciting investment prospect?
The $322.5 million global financial technology company is a niche player operating in the gig economy. Payfare offers full-service digital banking and instant payment solutions to workforces of all sizes. It has established partnerships with businesses and marketplaces, including leading gig platforms like DoorDash, Lyft, and Uber.
Payfare is turning the corner as shown by its vastly improving financials. In 2022, revenue soared 210% year over year to $129.9 million, while its net loss went down 86.4% to $2.9 million compared to $21.4 million in 2021. Also, the fintech posted a $2.9 million positive net profit in Q4 2022. At year-end 2022, active users numbered 1,053.873, representing a 106% jump from December 31, 2021.
Marco Margiotta, Payfare’s CEO and Founding Partner said, “We are extremely proud to announce our first positive earnings quarter along with record growth in Adjusted EBITDA and Operating Cash Flow in the fourth quarter. The latest buzz is the intention to venture into the high-growth Earned Wage Access (EWA) market.
Return-of-capital framework
At $9.34 per share, Crescent Point Energy underperforms and is down 1.89% year to date. Still, this mid-cap stock has rewarded investors nearly 445% in three years, or a compound annual growth rate (CAGR) of 75.9%. Had you invested $20,000 in May 2020, your money would be worth almost $110,000 today.
The $5.1 billion oil producer develops high-return resource plays, and its return-of-capital framework targets the return of up to 50% of discretionary excess cash flow to shareholders. According to management, the goal is achievable after the fundamental rebuilding and strengthening of Crescent Point’s asset portfolio in the last five years.
In 2022, discretionary excess cash flow increased 30.4% year over year to $1 billion. Apart from the special cash dividend in Q4 2022, the Board approved a 25% increase in the regular dividend for Q1 2023. If you invest today, the forward dividend yield is 4.28%.
Must-buy stocks
Payfare and Crescent Point Energy trade at less than $10 per share, but the potential earnings could be enormous in a bull market.
