The Canadian banking sector, particularly the Big Six, has displayed resiliency amid massive headwinds, as evidenced by their Q1 fiscal 2024 financial results. However, performance remains suspect as long as the longer-for-higher interest rate scenario extends.
Toronto Domino Bank (TSX: TD) is the most valuable Canadian brand in 2024, according to the annual report of Brand Finance PLC. Unfortunately, performance-wise, the bank stock is down 5.2% year to date. If you’re chasing higher returns and explosive growth this year, consider buying two technology stocks instead of the Big Bank stock.
Thus far, Celestica (TSX: CLS) and Tecsys (TSX: TCS) are outperforming the broader market. The former is flying high with 55.9%-plus growth, while the latter is up 18.23% year to date. Both growth-oriented companies have also reported impressive financial results.
Solid income growth
Celestica, a $7.2 billion company, is known for its high-reliability design, manufacturing, hardware platform, and supply chain solutions covering all product development stages. The Toronto-based firm operates in North America, Europe, China, and Southeast Asia.
In 2023, revenue increased 9.8% to US$8 billion versus 2022, while net income jumped 68% year over year to $244.6 million. The Connectivity & Cloud Solutions segment was the primary revenue driver. Its US$4.6 billion revenue represents 58% of the total revenue.
“The strong momentum we had in 2023 is continuing into 2024, and we remain confident in our long-term strategy,” said Rob Mionis, president and CEO of Celestica. Management’s goal is to make Celestica the undisputed industry leader in product and platform solutions across higher-value markets.
The company aims to deliver sustainable revenue and profitability growth after building a solid foundation for growth from 2016 to 2021. At $60.51 per share, the overall return in three years is 460.7%. Had you invested $10,000 three years ago, your money would be worth $56,870.30 today.
Record revenue
Tecsys is a Montreal-based supply chain Software-as-a-Service (SaaS) company with a $570.2 million market cap. In Q3 fiscal 2024 (three months ending January 31, 2024), SaaS revenue increased 48% year over year to a record $14.2 million versus Q3 fiscal 2023. Moreover, the annual recurring revenue of $87.2 million was 16% higher than a year ago.
Its President and CEO, Peter Brereton, credits the substantial SaaS revenue for the record quarterly results. However, net profit declined 14.5% year over year to $759 million. Nevertheless, Brereton adds, “Our SaaS margins continue to expand, and the resulting impact on our overall margin profile is becoming evident.”
Besides the activity across all key verticals and commercial channels, Brereton said the market shows no signs of slowing down. Mark Bentler, Tecsys’ CFO, Mark Bentler, said, “After our third quarter we embarked on a strategic restructuring designed to improve profitability over the long term.”
If you invest today, Tecsys trades at $38.79 per share and pays a modest 0.82% dividend. Market analysts’ 12-month average and high price targets are $46.60 (+20.1%) and $50 (+28.9), respectively.
Growth investing
Growth investing is still the theme in 2024, following the tech sector’s strong showing in 2023. The Toronto Dominion Bank remains a solid choice for income investors. Celestica and Tecsys are strong buys for visible growth and massive capital gain potential.
