Every economy is different, as it depends on the nation’s geographic location, resources, laws, and history. Canada is an oil and mineral-rich country. The TSX has some attractive dividend stocks but also hidden gems with significant growth potential if you stay invested. The short term might be bearish for these stocks, but they are on the path to tap future growth trends.
Two TSX stocks with high growth potential
A growth stock is one whose share price increases over time. A company’s stock price reflects its future earnings potential. Growth stocks will see a spike in revenue or profit growth because of expansion. Stocks of large companies do not give significant growth as they are already market leaders. Unless the market is growing rapidly, a market leader may not have high growth potential.
Here are two stocks focused on growing their revenue and earnings in the coming future.
Bombardier (TSX:BBD.B) is a business jet maker undergoing a turnaround. The company has downsized to become more efficient and reduce its heavy debt burden. The efforts of accelerated debt repayments, improving efficiencies, and focusing on high-margin products are paying off. Its first-quarter revenue and adjusted earnings before interest and tax (EBIT) surged 25% and 89%, respectively.
Bombardier aims to grow its revenue by 30% to $9 billion in 2025 ($6.9 billion in 2022) by delivering more business jets. Its $14.8 billion order book and its latest Challenger 3500 make this target look achievable. And this growth excludes the pending launch of its flagship Global 8000 aircraft in 2025. Moreover, the company is ready to grow its regular income from aftermarket services.
So far, Bombardier has exceeded its previous guidance, which helped pull the stock price up 226% after its 25:1 stock split in June 2022. It still has the potential to double your money, as the company revives its fundamentals and the market for business jet grows. However, the stock could face some bearishness in the short term due to macroeconomic weakness.
Dye & Durham
Dye & Durham (TSX:DND) is a software solution that helps legal and business professionals improve their workflow efficiency. The stock gained popularity, as it debuted the TSX amid the tech stock bubble. The company used the money raised through equity to expand rapidly through acquisitions which more than doubled its revenue to $474.8 million in fiscal 2022 ended June 30, 2022 ($208.9 million in fiscal 2021).
However, the slowing real estate market, in which DND has 50% exposure, eased the tech company’s revenue growth. DND expects its fiscal 2023 revenue to fall 5-6%. The short-term weakness does not affect its long-term target of $1 billion adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), which is four times its 2023 estimated adjusted EBITDA of $248 million.
DND aims to grow its exposure in other verticals and geographies, reducing its real estate exposure to 33% in three years. It also aims to increase revenue contribution from long-term contracts to more than 50% from 18% at present. Several companies have pushed their software spending amid a looming recession. But the recession is also when companies look to improve their efficiencies, and DND’s software solutions offer that.
DND stock is down 25% from its 2023 peak of over $21.8 in February, as investors priced in weak revenue. Now is a good time to buy and hold the stock, as it has the potential to double your money in a recovery rally.