The Bank of Canada’s rate pause in September didn’t boost the market because Governor Tiff Macklem cautioned that more hikes might be necessary due to stubborn inflation. He cited two reasons: previous hikes need more time to take effect, or 5% isn’t high enough.
Canada’s main stock index declined following the announcement, but a market pullback is unlikely. Many stocks continue to outperform, despite heightened volatility. Growth stocks like CES Energy Solutions (TSX: CEU), Tecsys (TSX: TCS), and VersaBank (TSX: VBNK) could even soar higher in 2023 and beyond.
In flight
CES Energy Solutions has already taken off in 2023 amid a challenging environment. At $3.96 per share, investors enjoy a 46.02% year-to-date gain and partake in the 2.56% dividend yield. Energy, the top-performing sector in the last two years, has recovered from the slump and is back in positive territory.
The $983.27 million provides clients in North America’s oil and natural gas industry with technically advanced consumable chemical solutions throughout the lifecycle of the oilfield. Two core business segments, drilling fluids & production and specialty chemicals, deliver the bulk of revenue streams.
In the first half of 2023, total revenue, funds flow from operations, and net income rose 29%, 58%, and 120% year over year to $1.07 billion, $125.6 million, and $66.9 million. Given the recovery in global energy demand and rising commodity prices, management maintains a supportive outlook for CES’s target market.
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Record quarterly revenue
Tecsys’s impressive financial results to start fiscal 2024 should put the tech stock on investors’ radars. The $414.58 million Software-as-a-Service (SaaS) company provides supply chain solutions. Its supply chain management software helps clients improve customer service, optimize opportunities, and reduce operating costs.
In the first quarter (Q1) of fiscal 2024 (three months that ended July 31, 2024), total revenue climbed 23% to $42 million versus Q1 fiscal 2023, a new quarterly revenue record. The annual recurring revenue (ARR) increased 20% to $78.3 million, while net profit soared 2,818% year over year to $1.17 million.
Tecsys chief financial officer Mark Bentler said, “Our momentum continues with back-to-back quarters of total revenue growth of 20% or more.” He added that Tecsys invests in areas that drive growth. The tech stock trades at $28.43 per share (+7.73% year to date) and pays a modest 1.06% dividend.
Unique and unmatched business model
Smaller banks, including the least-known VersaBank, continue to outshine Canada’s big banks thus far in 2023. The strong results in Q3 fiscal 2023 are reflected in the stock’s performance (+9.32% year to date). At $10.97 per share, the small-cap stock pays a 0.91% dividend.
This $284.4 million digital bank operates on a “branchless” partner (B2B) business model and uses a proprietary banking technology. In the three months that ended July 31, 2023, total revenue and net income climbed 37% and 83% to $79.5 million and $29.7 million versus Q3 fiscal 2022.
Its president and chief executive officer David Taylor said the unique branchless, partner-based, digital banking model remains unmatched in North America’s banking industry. VersaBank’s Canadian loan portfolio is steadily growing while acquiring an OCC (Office of the Comptroller of the Currency)-chartered bank in the U.S. will bring significant upside.
Multiply in value
CES is the top pick in the resurging energy sector. However, given their successful business models, Tecsys, and VersaBank could also multiply in value in 2023 and beyond.
