Canadian stocks underperformed compared to their American counterparts in 2023, although many experts expect 2024 to be a good year. Paul Harris, partner and portfolio manager at Harris Douglas Asset Management, told BNN Bloomberg that cyclical sectors like financials, oil and gas, and materials could stage a comeback.
Douglas adds that financials and utilities should benefit from rate stability and deliver better returns. The TSX had a positive return of 8.12% versus -8.66% in 2022, thanks to the tech sector’s outperformance. This year, two overlooked names and underpriced stocks are ready to rally.
Tecsys (TSX:TCS) is a laggard in the top-performing sector but should pick up steam following the impressive increase in Sales-as-a-Service (SaaS) revenue and strong business momentum in Q2 fiscal 2024. EQB (TSX:EQB) reported record earnings in fiscal 2023 and outperformed the Big Banks yet remains undervalued.
Supply chain technology
Tecsys provides enterprise-wide supply chain management software and related services. The $436 million tech firm from Montreal is also a dividend payer. If you invest today, the share price is $29.63, while the dividend offer is a modest 1.06%. Market analysts have a 12-month average price target of $46.75, a 57.7% upside.
In the three months ending October 31, 2023, SaaS revenue and Annual Recurring Revenue (ARR) rose 37% and 19% respectively to $12.1 million and $84.9 million versus Q2 fiscal 2023. On a year-to-date basis (first half of fiscal 2024), net profit increased 10% year over year to $831,000.
“Our activities in the quarter have strengthened our market position, bolstered our customer and partner communities, and reaffirmed our commitment to innovation. We are seeing strong pipeline expansion and activity across verticals,” said Peter Brereton, president and CEO of Tecsys. He notes the accelerated demand for pharmacy supply chain solutions.
Encouraging developments are the strong backlog despite reduced revenue from professional services and partner ecosystem growth during the quarter. Still, Brereton anticipates continued growth in professional services revenue, and Tecsys has adequate staff to meet customer demands.
Tecsys’ competitive advantage is the complex, regulated, and high-volume markets it serves. The company caters to the healthcare and distribution sector as well as converging commerce industries. Technological research and consulting firm Gartner predicts that supply chain technology will be a profitable technology investment in 2024.
Record earnings
Small-cap EQB did better than the Big Banks in 2023, as evidenced by its 57%-plus market-beating return. In the 12 months ending October 31, 2023, the $3.8 billion lender’s net income climbed 38% to $371.6 million versus fiscal 2022. The provision for credit losses increased by only 4% year over year to $38.9 million.
EQB President and CEO Andrew Moor said the bank is prepared for the future with robust capital ratios, excellent liquidity, and a sound approach to managing interest rates. Its CFO Chadwick Westlake adds the fiscal 2023 results validated the bank’s strength across economic and credit cycles.
EQB expects another greater than 15% ROE in fiscal 2024 (17.5% in fiscal 2023). At $91.43 per share, prospective investors can partake in the 1.73% dividend.
Earn two ways
Tecsys and EQB should be on investors’ radars in 2024. You can invest in either one depending on your sector preference. You can earn in two ways: price appreciation and dividends.
