After a weak beginning to this month, the Canadian equity markets have bounced back strongly over the last couple of days, with the S&P/TSX Composite Index rising by 1.4% for the month. Rising oil prices and improving investor sentiments amid solid economic numbers from the United States appear to have boosted the Canadian equity markets. Amid improving investor optimism, the following three TSX stocks would be a great addition to your portfolio.
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Dollarama
Earlier this week, Dollarama (TSX:DOL) reported a solid second-quarter performance, outperforming analysts’ expectations. Its revenue came in at $1.46 billion, beating analysts’ expectations of $1.4 billion. Its diluted EPS (earnings per share) of $0.86 outperformed analysts’ expectations by 11.6%. During the quarter, the company’s same-store sales grew by 15.5% on a 12.9% rise in transactions and 2.3% increase in average transaction value. Over the previous 12 months, the company has added around 81 stores, driving its top line.
Along with top-line growth, the gross margin expansion and increased contribution from Dollarcity drove its net earnings. Year over year, its diluted EPS increased by 30%. After posting a solid second-quarter performance, the discount retailer’s management raised its same-store sales growth guidance for this fiscal from 5-6% to 10-11%, improving investor sentiments. The company’s stock price has increased 7.8% since reporting its second-quarter performance.
Meanwhile, I expect the uptrend to continue, given Dollarama’s healthy growth prospects. The company expects to add 475 stores over the next seven years. It is also optimizing its logistic operations to support its expansion and strengthening its sourcing capabilities to lower intermediatory costs. Considering all these factors, I am bullish on Dollarama.
Canadian Natural Resources
The fear that the extension of production cuts by Russia and Saudi Arabia until the end of this year could lead to a substantial shortfall has driven oil prices above US$90/barrel. Also, the rising oil demand could prompt oil prices to remain elevated in the near-to-medium term. So, I have selected Canadian Natural Resources (TSX:CNQ), an oil and natural gas producer with operations in Canada, the North Sea, and Africa.
The company has planned to invest around $5.4 billion this year to strengthen and upgrade its asset base. Amid these investments and solid organic growth, CNQ’s management has provided optimistic guidance. The midpoint of management’s guidance represents a 5.5% increase from the previous year. Given its low maintenance capital requirement, the increased production and higher oil prices could substantially boost its cash flows.
Besides, the oil and natural gas producer has rewarded its shareholders by raising its dividends for the previous 23 years at a CAGR (compound annual growth rate) of 21%, with its yield currently at 4.12%. So, I believe CNQ would be an excellent buy.
WELL Health Technologies
My final pick would be a digital healthcare company, WELL Health Technologies (TSX:WELL), which provides omnichannel healthcare services and solutions. With the increasing internet penetration and introduction of innovative products, more patients are adopting telehealthcare services, thus expanding the addressable market for the company.
Meanwhile, the digital healthcare company is expanding its footprint through strategic acquisitions and organic growth across North America. Also, over the last few months, the company has launched many key initiatives on artificial intelligence, with several others in the pipeline. So, the uptrend in the company’s financials could continue while driving its stock price.
