Mid-cap stocks have a market capitalization of over $2 billion but lower than $10 billion. These companies are financially more stable than small-cap stocks but offer higher growth prospects than large-cap stocks. So, with these companies providing the best of both worlds of risk moderation and higher returns, here are my three top picks you can buy now.
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BlackBerry
BlackBerry (TSX: BB) would be one of the top mid-cap stocks to have in your portfolio, given its strong presence in the growing cybersecurity and IoT (Internet of Things) markets. The ever-increasing demand for IoT solutions in this digitally connected world has created multi-year growth potential for the company. The company’s management expects the revenue from its IoT segment to increase at an annualized rate of 18-22% through fiscal 2026. Also, despite the growing competition, its cybersecurity security segment business could rise by 9-12% annually.
Driven by these performances, management expects overall revenue to grow at a CAGR (compounded annual growth rate) of 12-15% through fiscal 2026. Supported by the topline growth, management expects gross margins to expand at an average of 200 basis points annually. Notably, the guidance also projects the company’s adjusted EPS (earnings per share) and cash flows to turn positive by 2025.
Despite the strong buying over the last few weeks, BlackBerry trades 80% lower than its 2021 high. So, considering its healthy growth prospects and discounted stock price, I am bullish on BlackBerry.
Nuvei
Second on my list would be Nuvei (TSX: NVEI), which has been witnessing healthy buying this year despite challenging market conditions. The company is up over 25% buoyed by its solid first-quarter earnings and healthy growth prospects. Supported by its strategic initiatives to drive innovation and expand geographically, total volume grew by 45% to $42.4 billion in the March-ending quarter. Revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by 20% and 5.1%, respectively.
Meanwhile, I expect the uptrend to continue amid the growing popularity of digital payments, expansion of its alternative payment methods, and acquisition of Paya Holdings in February. Notably, Nuvei’s management has provided upbeat 2023 guidance, with its revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) projected to grow by over 47% and 33%, respectively. Nuvei trades at an attractive NTM (next 12 months) price-to-earnings multiple of 14.4, making it an attractive buy.
Northland Power
My final pick would be Northland Power (TSX: NPI), which focuses on building and operating clean and green power infrastructure assets in Asia, Europe, Latin America, and North America. It has an economic interest in 3 gigawatts of power-producing facilities and a solid developmental pipeline with 20 gigawatts of power-producing facilities in construction or various developmental stages. With liquidity of $580 million, the company is well-equipped to progress with its growth initiatives.
However, amid the weakness in the clean energy sector, Northland Power has lost over 35% of its stock value compared to its last year’s highs. The steep pullback has dragged its price-to-book multiple down to 1.7, making it an attractive buy. Also, the company offers a monthly dividend of $0.10/share, with its forward dividend yield at 4%. Considering all these factors, I expect Northland Power to deliver superior returns in the long run.
