Investing in the equity markets is a proven strategy for those looking to generate inflation-beating returns. You need to identify companies that are part of expanding addressable markets that allow them to increase revenue and earnings consistently. Here are two such top TSX stocks you can buy and hold for $2,500 right now.
Telus International stock
Valued at $2 billion by market cap, Telus International (TSX:TIXT) provides end-to-end transformation services to enterprises. Telus International offers digital experience solutions, including omnichannel customer experience, enterprise mobility solutions, data analytics, cloud contact centres, and others.
Telus International estimates its total addressable market, or TAM, at over $750 billion, providing it with enough room to keep growing sales, which stood at $2.47 billion in 2022.
The company provides a unique combination of new economy services. Its AI (artificial intelligence) data solutions and content moderation form a crucial offering to several companies. The increase in online user-generated content should drive demand for efficient digital trust and safety services. Telus emphasized its AI-powered data solutions also provide it with cross-selling opportunities for content moderation services.
Telus International stated that it enjoys sticky client relationships, as the average client tenure is nine years. Moreover, the average number of programs per client is 18, which suggests customer spending increases over time.
Telus International is forecast to grow its revenue by 11.3% year over year in 2023 to $3.71 billion and by 8% to $4 billion in 2024. Comparatively, its adjusted earnings per share is estimated to widen from $1.26 in 2023 to $1.51 in 2023. So, priced at 0.5 times forward sales and five times forward earnings, TIXT stock is very cheap.
Down 80% from all-time highs, Telus International stock trades at a discount of 250% to consensus price target estimates.
ATS stock
ATS (TSX:ATS) provides custom-designed, built, and installed manufacturing solutions to companies. It leverages its capabilities to serve the automation system requirements of global customers across industries such as life sciences, transportation, consumer products, and energy.
Between fiscal 2018 and 2023 (ended in March), ATS increased revenue by 18.2% annually and earnings by 27.7%. This steady expansion in growth rates allowed the company to return 262% to shareholders in the last 10 years.
ATS has grown its top line on the back of highly accretive acquisitions. For instance, it has deployed over $1.4 billion on 19 acquisitions to date, allowing it to target growth-oriented markets that are equipped with low cyclicality and that operate in regulated industries.
ATS reported revenue of $2.6 billion in the last 12 months, with adjusted earnings before interest, tax, depreciation, and amortization of $401 million, indicating a margin of 15.6%. Analysts tracking ATS expect sales to rise by 13.6% to $2.93 billion in fiscal 2024.
Despite a challenging macro environment, ATS is forecast to end 2024 with earnings of $2.69 per share, indicating the stock trades at 19.5 times forward earnings, which is reasonable.
Analysts remain bullish on ATS stock and expect it to gain 35% in the next 12 months.
