The Canadian tech stocks marked a recovery in 2023. Despite the recent gains, shares of several Canadian companies are trading cheap, making them an attractive investment for the long term. I’ll discuss three high-growth Canadian stocks priced under $20 with the potential to deliver multifold returns in the coming years.
Payfare
Speaking of the top under-$20 stocks, investors should keep Payfare (TSX: PAY) on their radar. This financial technology company provides payments, digital banking, and loyalty-rewards solutions to the gig economy workforce. Like most TSX tech stocks, shares of Payfare witnessed a recovery and are up about 39% year to date.
It’s worth highlighting that Payfare has consistently delivered solid financials regardless of economic uncertainty. Its top line is growing fast on the back higher active user base. For instance, Payfare’s revenue increased 76% in Q1 (first quarter) of 2023 due to a 62% increase in its active user base. Thanks to the higher sales, Payfare has generated positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) in the past several quarters.
Looking ahead, Payfare’s strategic partnerships with the top food delivery and ride-sharing platforms, international expansion, and new customer wins position it well to deliver solid growth. Also, its recurring revenue base, new product launches, and lower customer acquisition costs augur well for future growth.
WELL Health
WELL Health (TSX: WELL) is another top under-$20 stock poised to deliver stellar returns in the long term. After a sharp decline in 2022, shares of this digital healthcare company recovered swiftly in 2023 and are up about 62% year to date.
The significant growth in WELL Health stock is backed by its robust financial performance amid a challenging macro environment and easing of restrictions. WELL Health’s revenue is growing rapidly, reflecting higher omnichannel patient visits. Further, the company’s management remains upbeat and raised the full-year revenue-growth guidance, indicating the strength of its business.
The continued increase in its omnichannel patient visits and momentum in the high-margin virtual services revenue suggests that WELL Health will likely deliver solid organic growth in the coming quarters. In addition, its investments in AI (artificial intelligence) technologies and strategic acquisitions will support its growth by expanding its addressable market and new product development.
WELL Health is profitable and is growing at a decent pace. Further, it generates robust cash flows. Despite the recovery, WELL Health stock is trading too cheap to ignore. It is trading at a forward enterprise value-to-sales multiple of two, much lower than the historical average, providing a solid entry point near the current levels.
Absolute Software
The final stock on this list is Absolute Software (TSX: ABST). The company provides endpoint security solutions and is well positioned to capitalize on the ongoing digital transformation and growing demand for cybersecurity products and solutions.
Absolute Software continues to perform well, thanks to the momentum in its enterprise and government segment, which drives its overall annual recurring revenue base. While its sales are growing at a decent pace, Absolute Software’s adjusted EBITDA has increased at a compound annual growth rate of 57% between fiscal 2018 and fiscal 2022. Furthermore, its net dollar retention rate remains high.
Looking ahead, the secular sector tailwinds, geographical expansion, accretive acquisitions, new products, customer wins, and cross-selling opportunities will likely drive its stock price higher.
