After delivering over 7.3% returns in the last quarter, the S&P/TSX Composite Index is up 1.7% this year. Strong quarterly performances and signs of easing inflation have improved investors’ sentiments, thus increasing the equity markets. Meanwhile, here are two TSX stocks that I am bullish on after their solid fourth-quarter performances.
goeasy
goeasy (TSX:GSY) posted a solid fourth-quarter performance earlier this month, with loan originations of $705 million. These loan originations expanded its loan portfolio to $3.65 billion, a 30% increase from the previous year’s quarter amid record credit applications. The company witnessed solid performances in unsecured lending, point-of-sale lending, and automotive financing segments.
The subprime lender witnessed a stable credit and payment performance during the quarter, with its net charge-off rate falling by 20 basis points to 8.8%. It was also closer to the lower end of the company’s 8.5%-10.5% guidance. The improvement in the product mix of its loan portfolio and enhanced underwriting and income verification processes led to stable credit performance. It also lowered its allowance for future credit losses from 7.37% to 7.28%. Amid these solid operating performances, the company’s revenue and adjusted EPS (earnings per share) grew by 24% and 32%, respectively.
Meanwhile, goeasy’s management has raised its quarterly dividend by 22% to $1.17/share. It was the 10th straight year of dividend growth, with its forward yield currently at 2.89%. The company’s management provided a new medium-term guidance, expecting to grow its loan portfolio to $6 billion by 2026. Since reporting its fourth-quarter performance, the company’s stock price has increased by 3.1%. However, its valuation still looks reasonable, with its NTM (next-12-month) price-to-earnings and NTM price-to-sales multiples at 9.6 and 1.8, respectively. Considering all these factors, I believe the uptrend in goeasy’s stock price will continue.
Waste Connections
Another top TSX stock that I am bullish on after its impressive fourth-quarter performance is Waste Connections (TSX:WCN). During the quarter, the company’s revenue grew 8.9% to US$2.04 billion amid price-led organic growth and continued acquisition. The acquisitions completed over the last four quarters have contributed $53 million to its top line.
The solid waste management company generated an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of US$656 million, representing a 16.4% increase from the previous year’s quarter. The top-line growth and the expansion of its EBITDA margin by 200 basis points drove its adjusted EBITDA. Favourable pricing, solid execution, and continued improvement in its operating trends boosted its EBITDA margins. Meanwhile, its adjusted EPS stood at $1.11, representing a 9.69% increase from the previous year’s quarter.
Notably, Waste Connections’s management has provided optimistic guidance for this year. It has projected its 2024 revenue and adjusted EBITDA to grow by 9% and 13%, respectively. Earlier this month, the company completed the acquisition of 30 energy waste treatment and disposal facilities in Western Canada for $1.08 billion. So, its continued acquisitions and favourable pricing could drive its financials in the coming quarters.
Since reporting its fourth-quarter earnings, the company’s stock price has increased by over 10%, and it currently trades close to its all-time high. Despite the surge, I believe the uptrend in the company’s financials and stock price will continue due to the essential nature of its business and healthy growth prospects.
