3 TSX Stocks With Serious Breakout Potential

The TSX is on a downward trend, but three growth stocks continue to outpace the market and are well positioned to rise further.

| More on:
falling red arrow and lifting

Image source: Getty Images

The TSX has lost nearly 3% (573.76 points) in the last six days of May 2023 and is starting June with a minimal 0.97% year-to-date gain. Four primary sectors out of 11, led by energy, are in negative territory. But despite the downward trend, buying opportunities exist especially growth stocks with serious breakout potential.

Consider taking positions in Headwater Exploration (TSX:HWX), Bombardier (TSX:BBD.B), and Spin Master (TSX:TOY). The three stocks could deliver superior returns this year, as they continue to outpace the market amid the elevated volatility.

Top performer

Energy (-10.25%) is the worst-performing sector entering June, although Headwater Exploration defies the general sector weakness. At $6.48 per share, this energy constituent is up 11.19% year to date. Based on market analysts’ price forecasts, the return potential in one year is between 23.5% ($8) and 46.6% ($9.50).

If you invest today, the $1.52 billion resource company also pays a lucrative 6.36% dividend (quarterly payout). Headwater is one of Canada’s petroleum and natural gas producers. It operates in Marten Hills, Alberta, boasting high-quality oil production, reserves, and lands, and McCully Field, New Brunswick, maintains low-decline natural gas production and reserves.

In the first quarter (Q1) of 2023, revenue and net income declined 12.6% and 29.2% to $104.2 million and $29.97 million versus Q1 2022. According to management, Headwater can navigate the extreme volatility in commodity prices because of positive working capital. It can execute a focused business plan and deliver stable dividend streams. 

Thriving business

Bombardier manufactures business aircraft and private jets while maintaining service centres globally to provide robust customer support. The $5.13 billion company caters to governments, fractional ownership providers, and multinational corporations — not to mention private individuals.

The business thrives, evidenced by the strong results in Q1 2023. In the three quarters ending March 31, 2023, revenue rose 17% to $1.45 billion compared to the same quarter last year. Notably, net income topped $302 million versus the $287 million net loss in Q1 2022.

Besides the projected 15% increase in deliveries in 2023, Bombardier can ramp up production to build inventory when its new global production facility opens by year-end. Market analysts’ average and high price targets in 12 months are $77.82 and $103.07. BBD.B trades at $53.82 per share (+2.97 year to date).

Breakthrough innovation

Spin Master will leverage the power of its three creative centres to capture market share, deliver profitable growth, and create long-term shareholder value. The $3.51 billion children’s entertainment company plans to bring breakthrough innovation to the toy aisle, including new launches within its core and licensed brand portfolios.

Despite incurring a net loss of US$1.9 million in Q1 2023 compared to the US$45.6 million net income in Q1 2022, management said Spin Mater is well positioned to execute its strategy, invest in innovation, expand, and pursue acquisitions. Its chief financial officer Mark Segal expects retail inventory headwinds to be over by the end of Q2 2023.

Market analysts see a potential price gain of at least 29.88% to $44.03 from $33.90 (+1.91% year to date). The overall return could be higher if you include the 0.68% dividend.

Exciting prospects

Headwater Exploration, Bombardier, and Spin Master are exciting prospects in today’s declining market. The stocks could deliver superior returns if the businesses can buck existing market trends.   

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Spin Master. The Motley Fool has a disclosure policy.

More on Investing

growing plant shoots on stacked coins
Dividend Stocks

Here Are My Top 5 Dividend Aristocrats to Buy Right Now

Now is the time to buy these top five dividend aristocrats at their two-year low before they recover to 2021…

Read more »

Target. Stand out from the crowd
Stocks for Beginners

5 Stocks You Can Confidently Invest $500 in Right Now

Whether it's stocks making a comeback or proven investments over decades, these five belong in your portfolio.

Read more »

edit Businessman using calculator next to laptop

Unearthing Incredible Value: 2 Dirt-Cheap Commodity Stocks That Demand Attention Today

Barrick Gold (TSX:ABX) and another great mining stock look like huge value plays right here.

Read more »

A woman shops in a grocery store while pushing a stroller with a child

New Rules for Grocers: 1 Canadian Grocery Stock That Could Soar

Metro (TSX:MRU) stock looks poised to win as it signs onto the new grocery code of conduct.

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

Is NorthWest REIT Stock the Best High-Yield Dividend for You?

NorthWest REIT (TSX:NWH.UN) offers a substantial dividend, but exercise caution with this riskier stock.

Read more »

oil and gas pipeline
Energy Stocks

TC Energy Stock Is Starting to Get Ridiculously Oversold

TC Energy (TSX:TRP) stock is one of those deep-value dividend plays for the next decade and beyond.

Read more »

An analyst uses a computer and dashboard for data business analysis and Data Management System with KPI and metrics connected to the database for technology finance, operations, sales, marketing, and artificial intelligence.

Want to Get Richer? Here Are the 3 Best Stocks to Buy Now and Hold Forever

These three stocks all have fantastic operations and years of growth potential, making them three of the best to buy…

Read more »

Dividend Stocks

Income Stocks: A Once-in-a-Decade Chance to Get Rich

These two income stocks are among the best on the TSX for those seeking consistent total returns over a long-term…

Read more »