Stock investing is not without risks, although the TSX had negative returns only three times in the last 10 years. Canada’s primary stock market lost 11.09%, 11.64%, and 8.66% in 2015, 2018, and 2022, respectively. Interestingly, it eked a positive 2.17% return during the COVID year in 2020, then stormed back with +21.74% in 2021.
The TSX gained 8.12% in 2023 on the strength of the technology sector. This year presents plenty of earning opportunities because of moderating inflation and potential interest rate cuts.
SNC-Lavalin Group (TSX:ATRL) and Northland Power (TSX:NPI) are among the tempting and profitable investment options. The former continues to secure high-profile projects, while the latter made leadership changes, and capacity expansion is underway. However, despite the huge upside potential, both carry much risk going forward.
Sustainable value creation
In September 2023, SNC-Lavalin Group rebranded and changed its corporate name to AtkinsRéalis. This year, it could become the legal name if shareholders approve the name change during their annual meeting. The $7.55 billion global professional services and project management company operates in the engineering and construction industry.
Its president and chief executive officer (CEO), Ian L. Edwards, said, “Our new name, AtkinsRéalis, denotes an inflection point for the repositioning of the company and a fresh identity for a dynamic organization. He adds the professional services giant is well-positioned for long-term sustainable value creation.
Investors nearly wrote off the stock in late 2019 after the company pleaded guilty to fraud and paid $280 million in fines over five years. Besides losing almost $1 billion in market value, the share price sunk to $15.32 on September 4, 2019. ATRL trades at $42.52 per share today, or 177.5% higher. Also, in 2023, it rewarded investors with an overall return of 79.2% on top of the 0.19% dividend.
The scandal left a scar, but management insists that SNC-Lavalin is a transformed company. In the third quarter (Q3) of 2023, revenue increased 24.4% year over year to a quarterly record high of $2.2 billion. Notably, net income soared 177.8% to $105 million versus Q3 2022.
SNC-Lavalin recently partnered with Bird Construction in the Rail Connect Partners joint venture that is part of Toronto’s transit-oriented community plan.
Expansion phase
Northland Power’s hefty dividend compensated for the 42.25% loss in 2023. At $24.23 per share, the utility stock’s dividend offer is 4.95%. The $6.16 billion independent power producer (IPP) owns and operates clean and green power facilities in North America, Latin America, Europe, and Asia.
In the first three quarters of 2023, sales and net income dropped 11.1% and 72.8% year over year to $1.6 billion and $171.8 million, respectively. The IPP’s current capacity is approximately 3.4 gigawatts (GW) but could reach 15 GW with its development pipeline and expansion completion.
The enhanced capacity could boost Northland’s financial performance. Also, management plans to capitalize on the ever-growing demand for renewable energy, particularly in the offshore wind industry. Market analysts recommend a buy rating for NPI, and they see a return potential between 32.1% and 77.5% in 12 months.
Understand the risks
SNC-Lavalin, AtkinsRéalis now, and Northland Power are potential multi-baggers. Still, you must understand the respective business risks and ensure they align with your risk appetite before investing.
