The Canadian equity markets are on an upward momentum this year, rising 5.5% as of April 3rd closing price. Signs of easing inflation, solid quarterly performances, and strong commodity prices have improved investors’ confidence, driving the equity markets. Meanwhile, the following three TSX stocks have outperformed the broader equity markets this year amid solid quarter performances. Let’s assess these stocks to determine whether the rally could continue.
Waste Connections
Waste Connections (TSX: WCN) has delivered over 15% returns this year amid solid fourth-quarter earnings and continued acquisitions. The solid waste management company reported an excellent fourth-quarter performance in February, with its revenue growing by 8.9% amid improved commodity-driven revenues and acquisitions. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and adjusted EPS (earnings per share) grew by 16.4% and 24.2%, respectively.
In February, WCN acquired 30 waste disposal-oriented assets from Secure Energy for $1.08 billion, which could contribute around US$225 million to its annual revenue. The company is expanding its Renewable Natural Gas (RNG) and resource recovery facilities, which could drive its financials in the coming quarters. Meanwhile, WCN’s management has provided an optimistic 2024 guidance, with its revenue and adjusted EBITDA projected to grow by 9.1% and 13.4%, respectively. Also, its adjusted EBITDA margin could expand by 120 basis points to 32.7%.
Moreover, future acquisitions could further boost its financials. Given its healthy growth prospects and solid underlying businesses, I believe WCN would be an excellent buy right now.
Savaria
Another stock that has outperformed the broader equity markets this year is Savaria (TSX: SIS), which is up 11.2%. Last month, the company reported an excellent 2023 performance, with its revenue growing by 6.1%. Solid organic growth and favourable currency translation boosted its sales. However, the divestment of its Norway operations offset some of the growth.
Supported by its top-line growth, its adjusted EBITDA increased by 8.2% while its adjusted EBITDA margin expanded by 30 basis points. It closed the year with $223.3 million in available funds. So, its financial position looks healthy. Meanwhile, the growing aging population, rising income levels, and growing investment in healthcare infrastructure could drive the demand for the company’s products. Given Savaria’s expanded product offerings, multiple production facilities, and a worldwide dealer network, it can benefit from market expansion.
Meanwhile, the company’s management expects to cross $1 billion in revenue by 2025 while improving its adjusted EBITDA margin to 20%. So, its growth prospects look healthy. Savaria also pays a monthly dividend, with its forward yield currently at 3.11%. Its valuation looks attractive, with its NTM (next-12-month) price-to-sales multiple at 1.3. Considering all these factors, I am bullish on Savaria.
Loblaw Companies
Loblaw Companies (TSX: L), Canada’s largest food and pharmacy retailer, has returned 17.2% this year, comfortably outperforming the broader equity markets. In February, the retailer reported an impressive fourth-quarter performance, with its revenue and adjusted EBITDA growing by 3.7% and 9.4%, respectively. Given the challenging environment, its value propositions continued to drive traffic, with its drug and food retail segments posting positive same-store sales.
Although inflation is showing signs of easing, prices remain higher. So, I expect the company to continue witnessing healthy footfalls in the coming quarters. Meanwhile, the company plans to open 40 stores and convert 30 Provigo stores to Maxi. It expects to make a capital investment of $2.2 billion this year. Amid these growth initiatives, Loblaw’s management expects its adjusted EPS to grow in high single digits this year. The company has also planned to return most of its free cash flows to its shareholders through dividends and share repurchases.
Loblaw pays a quarterly dividend of $0.446/share, with its forward yield at 1.19%. Its attractive NTM price-to-sales multiple of 0.7 makes it an excellent buy.
