Momentum is high and strong on some TSX stocks this month. Traders have seen gains in the 30% range on a number of small-caps so far this month. Although gains beyond 62% within a month are usually a preserve on volatile penny stocks, one $700 million tech stock has bagged a similar return during the first three weeks of November 2023.
Lightspeed Commerce (TSX: LSPD) stock is on the move this month, and Dye & Durham (TSX: DND) stock has made a violent surge in November. Let’s have a look at the two of the most striking big movers on the TSX for November.
Dye & Durham
Dye & Durham stock is on a tear this month. Shares have surged by 62.6% so far in November 2023. Following a low October when DND stock slid by 39% in a month, November has been a huge comeback month for the $712 million legal practice management software vendor that’s undergoing a significant restructuring.
Why is Dye and Durham stock rising in November 2023? The company released what management called its “best quarterly financial results” on October 30 — adjusted revenue grew 8.1% year over year. Subsequently, the company announced plans to dispose of non-core assets, lower operating costs, and improve free cash flow generation in the fiscal year 2024 (ending in June next year).
Plagued with a $1.3 billion debt load and rising interest expenses, Dye & Durham is deleveraging its balance sheet, selling off non-core assets, and management recently announced plans to repurchase up to $95 million worth of the company’s outstanding debentures.
Before the recent rebound, Dye and Durham’s stock price had declined by 80% over the past two years and traded in value stock territory.
The market has reacted positively to Dye and Durham’s restructuring exercise in November. This month’s return is currently the third-best monthly gain investors have ever seen on DND stock since it debuted on the TSX in July 2020. The best monthly return on the stock included an 82.97% surge in December 2020, followed by an 80.9% rally in August 2020.
Lightspeed stock to post another record November surge
Retail and payments software company Lightspeed Commerce stock could post its third-best monthly gain in November 2023. Up 32% so far this month, LSPD stock’s November rally (thus far) is the third-largest monthly gain behind a 33% surge in December 2020, which was also no match to a staggering 58.5% rally in Lightspeed stock price seen in November 2020 — before a scathing short-seller report bruised the stock in September 2021 and made investors doubt the company’s capacity ever to generate positive earnings.
Why is Lightspeed stock rising in November? It’s an earnings story – again. On November 2, Lightspeed reported its first-ever “breakeven or better” quarter covering the three months to September 30, 2023, and raised its financial outlook for the Fiscal Year 2024 (which ends in March next year). Quarterly revenue at US$230.3 million was 25% higher year over year, and gross payment volume (GPV), a key metric for the company’s fast-growing payments platform, surged by 59% year over year to US$5.9 billion.
Following a restructuring exercise, layoffs, and strong revenue growth so far this year, Lightspeed’s adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) of US$0.2 million was positive for the first time since the company went public in 2019.
Adjusted EBITDA is generally an operating earnings measure for a business’s capacity to generate some profit, regardless of how its principals organized and financed it. Lightspeed has shown a skeptical market that it has some potential to stem perpetual losses, break even, and finally report sustainable profits.
Profitable companies that generate positive cash flow are more valuable than those that persistently burn through shareholders’ capital with nothing to show for it. I have been bullish on Lightspeed stock this year.
