The TSX has struggled to stay above water for most of 2024. Elevated inflation and a high interest rate environment are massive headwinds, although the Bank of Canada’s recent rate cut could stabilize and lift the stock market.
Nevertheless, many stocks rewarded investors with massive gains. ADF Group (TSX: DRX) and CES Energy Solutions (TSX: CEU) are among the best in the lot, while TELUS International (TSX: TIXT) and BlackBerry (TSX: BB) are disappointments. My view is based on the trailing one-year price return of the four stocks.
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Stellar returns
ADF Group continues to impress. The current share price of $20.51 (+196.5% year to date) is 487.4% higher than a year ago. Had you invested $6,500 in June last year, your money would be $38,199.14 today. This industrial stock has delivered a total return of 1,151.1% in 3 years.
The $582.6 million company operates in North America’s metal fabrication industry. In addition to fabrication, ADF installs steel structures and heavy steel built-ups, and takes on highly technical complex mega projects.
The business thrives, evidenced by the Q1 fiscal 2024 earnings results. In the three months ending April 30, 2024, revenue and net income climbed 33.8% and 184.2% year over year respectively to $107.4 million and $15.3 million.
Screaming buy
CES Energy has risen from obscurity and is now a screaming buy in the heavyweight energy sector. At $7.90 per share, the trailing one-year price return is 197.5%. This small-cap stock also pays a 1.7% dividend. The $1.7 billion company provides advanced consumable fluids and specialty chemicals to North America’s major oil and natural gas industry players.
In three months ended March 31, 2024, revenue and net income rose 6% and 65% to $588.6 million and $54.5 million, respectively, compared to Q1 2024. Free cash flow (FCF) soared 277.6% year over year to $57.4 million. CES remains optimistic for the remainder of the year owing to strong global demand, particularly in developing countries.
Intense competition
TELUS International is the technology company of TELUS, Canada’s second-largest telecommunications firm. It designs, builds, and delivers digital solutions for customer experience (CX) globally. As of this writing, TIXT is down nearly 30% year to date. The current share price of $7.98 is 61.8% lower than 12 months ago.
In Q1 2024, revenue declined 4.2% year over year to $657 million, while net income doubled year over year to $28 million. Unfortunately, the profit jump did not boost the stock. According to management, business risks include intense competition from companies offering similar services.
Also, TIXT derives the bulk of revenues from two major clients. A business disruption in one or both will have a material adverse effect on profitability.
No turnaround
BlackBerry has been a hard luck stock in recent years. Profitability is the issue weighing on this former smartphone maker. Today, BlackBerry is a $2.2 billion software company specializing in cybersecurity. At $3.80 per share, the trailing one-year price return is 44.7%, while the overall return in 3 years is 77.4%.
In fiscal 2024 (12 months ended February 29, 2024), revenue increased 30% year over year to US$853 million, while the net loss dwindled 82.3% to US$130 million versus fiscal 2023. BlackBerry incurred losses in three of the last four years.
Buy and avoid
Top performers ADF Group and CES Energy Solutions could further benefit from the recent rate cut. However, I’d avoid TELUS International and BlackBerry.
