With inflation showing signs of easing, the Bank of Canada slashed its benchmark interest rates by 25 basis points to 4.75% last week. It was the first rate cut since March 2020. Lower interest rates could boost economic activity, thus driving financials and stock prices. So, amid the improving macro environment, I am bullish on the following three top Canadian stocks.
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Celestica
First on my list would be Celestica (TSX:CLS), which has been witnessing solid buying over the last three years, with its stock price rising by 635%. Its impressive performance and exposure to high-growth markets, such as electronics manufacturing services and artificial intelligence, have raised investors’ confidence, driving its stock price. Given the expanding addressable market and attractive valuation, I believe the uptrend will continue despite the recent increase.
The growing usage of artificial intelligence and machine learning in various sectors has raised the demand for high-speed computing switches. Meanwhile, the company is developing and introducing innovative product offerings to meet the growing demand, which could continue to drive its financials. Besides, its diversified customer base provides stability to its financials. Further, Celestica trades at an attractive NTM (next 12 months) of 16.3, making it an excellent buy at these levels.
goeasy
With the slashing of interest rates, economic activity could rise, thus driving credit demand. So, I have chosen goeasy (TSX:GSY) as my second pick. The subprime lender has grown its top and bottom lines at a CAGR (compound annual growth rate) of 19% and 28.6%, respectively, since 2013. Even in the first quarter of this year, the company has continued its uptrend, driving its revenue and adjusted EPS (earnings per share) by 24%.
Despite solid growth, goeasy has acquired just 2% of the Canadian subprime market. So, its scope for expansion looks healthy. Given its growing customer base, dealer network, and point-of-sales financing business, the company is well-equipped to expand its market share, thus driving its financials. Besides, management projects its loan portfolio to grow by 50% from $4 billion to $6 billion by the end of 2026. Further, GSY has also been raising its dividends at an annualized rate of around 30% since 2014 and trades at an attractive NTM price-to-earnings multiple of 10.8, making it an attractive buy.
Waste Connections
My final pick would be Waste Connections (TSX:WCN), which operates a highly defensive waste management business in secondary and exclusive markets across the United States and Canada. The company is expanding its footprint through strategic acquisitions and organic growth, boosting its financials and stock price. Over the last 10 years, the company has returned 560%, outperforming the broader equity markets.
So far this year, Waste Connections has made several acquisitions that can contribute US$375 million in revenue annually. Besides, the company projects this year will be one of its busiest ever. So, I expect the company to continue its acquisitions in the coming quarters. Further, it is constructing several resource recovery and renewable natural gas facilities, which could contribute an incremental EBITDA (earnings before interest, tax, depreciation, and amortization) of $200 million by 2026. Given its solid underlying business, healthy growth prospects, and consistent dividend growth for the previous 14 years, the uptrend in Waste Connections’s stock price will continue.
