The Canadian equity markets are on an upward momentum this year, with the S&P/TSX Composite Index rising by 4%. Signs of easing inflation and solid quarterly performances from prominent companies have improved investors’ sentiments, driving the equity markets higher despite growing geo-political tensions. Amid the recent surge, the index is trading just 1.7% lower than its all-time high.
Despite the strong performance from the broader equity markets, few Canadian stocks are trading at a substantial discount from their recent highs, thus offering excellent entry points. Here are my three top picks.
Nuvei
Nuvei (TSX: NVEI) is a Canadian fintech company that helps businesses accept next-generation payment methods through its modular, flexible, and scalable technology. Earlier this month, it posted a solid fourth-quarter performance, with its revenue growing by 46%. The growth across its three segments and favourable currency translation drove its top line. Supported by its top-line growth, its net income grew by 51% in the fourth quarter to $14.1 million. Its net income margin also increased from 4.24% to 4.38%. Meanwhile, its adjusted EPS of $0.08 represents an increase of 33.3% from the previous year’s quarter.
Further, the growing popularity of digital transactions amid e-commerce growth has created multi-year growth potential for Nuvei. Besides, the company is expanding its product portfolio, venturing into new markets, making new partnerships, and growing its APM (alternative payment methods) portfolio to strengthen its position. Given its healthy growth prospects, Nuvei’s management expects its revenue to grow at 15 to 20% annually in the medium term. Also, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin could increase from 40% to over 50% in the long term.
Despite its healthy growth prospects, Nuvei’s valuation looks attractive, with its NTM (next 12 months) price-to-earnings and price-to-book multiples at 11.5 and 1.6, respectively. Given its growth initiatives, attractive valuation, and favourable environment, I am bullish on Nuvei at these levels.
WELL Health Technologies
Another stock I am bullish on is WELL Health Technologies (TSX: WELL), which helps healthcare professionals improve patient experiences. The digitization of clinical procedures and increased adoption of telehealthcare services are expanding the company’s addressable market. Meanwhile, the company is developing innovative products and artificial intelligence tools to strengthen its market share.
Further, the digital healthcare company continues expanding its footprint through strategic acquisitions. It is currently working on acquiring 13 clinics through absorption and 30 clinics through acquisitions. Besides, it is focused on streamlining its operations and optimizing its cost structure, which could improve its operating efficiency and drive profitability. So, its outlook looks healthy. Meanwhile, its NTM price-to-sales and NTM price-to-earnings multiples stand at 1.1 and 14.7, respectively, making it an attractive buy.
goeasy
goeasy (TSX: GSY) has been witnessing solid buying since the beginning of October, with its stock price rising by 55%. Despite the recent surge, it trades over 24% lower than its 2021 highs. Also, its valuation looks attractive, with its NTM price-to-sales and NTM price-to-earnings multiples at 1.9 and 9.8, respectively.
Meanwhile, it reported impressive fourth-quarter performance last month, with its revenue and adjusted EPS (earnings per share) growing by 24% and 32%, respectively. Bolstered by solid loan originations, its loan portfolio expanded by 30% from the previous year’s quarter to $3.7 billion. It also witnessed stable credit and payment performance during the quarter, with its net charge-off rate falling by 20 basis points to 8.8%.
Further, goeasy’s management has provided impressive three-year guidance, with its loan portfolio projected to reach $5.8 to $6.2 billion by 2026. The expansion of the loan portfolio could drive its revenue to $1.7 to $1.9 billion by 2026, with the midpoint of the guidance representing annualized growth of 12.9% through 2026. So, given its healthy growth prospects and cheaper valuation, I am bullish on goeasy.
