Investing in low-cost index funds is the best way for investors looking to gain exposure to the stock market. However, those with a higher risk appetite can consider investing in quality individual stocks with the potential to beat the broader markets over time. Here are two TSX stocks that could turn $500 into $1,000 by 2030. Let’s dive deeper.
Celestica stock
Valued at $7.6 billion by market cap, Celestica (TSX:CLS) has returned more than 600% to shareholders in the last five years, crushing broader market returns by a wide margin. Despite its outsized gains, Celestica stock trades 26% below all-time highs.
Celestica provides supply chain solutions in North America, Europe, and Asia. It operates through two primary business segments that are Advanced Technology Solutions and Connectivity & Cloud Solutions.
In the second quarter (Q2) of 2024, Celestica reported revenue of $2.39 billion, an increase of 23% compared to $1.94 billion in the year-ago period. The company ended Q2 with an operating margin of 6.3%, higher than the year-ago margin of 5.5%. While ATS segment sales fell 11%, CCS revenue surged by 51% year over year in Q2 of 2024.
An expanding revenue base and improving operating margins allowed Celestica to increase adjusted earnings from $0.55 per share to $0.91 per share in the last 12 months. Additionally, its return on invested capital rose from 20% to 26.7% in this period.
Celestica reported an operating cash flow of $123 million and a free cash flow of $63.3 million in Q2, which means it spent $60 million on capital expenditures.
The company’s stellar performance in Q2 has allowed it to increase its revenue guidance to $9.45 billion in 2024, up from its prior outlook of $9.1 billion.
Celestica stock is quite cheap as it trades at 14 times forward earnings. Comparatively, analysts expect adjusted earnings to rise by 25% annually in the next five years. Bay Street remains bullish on Celestica stock and expects shares to surge by almost 20% in the next 12 months.
Enghouse Systems stock
Valued at $1.7 billion by market cap, Enghouse Systems (TSX:ENGH) trades around 70% below all-time highs. It has two business segments that include the following:
- Interactive Management: The business facilitates remote work and manages customer communications across devices and platforms.
- Asset Management Group: The segment offers a portfolio of software and services to cable operators, network telecom providers, media, transit, and defence companies.
Enghouse reported revenue of $125.8 million in fiscal Q2 of 2024 (ended in April), an increase of 11% year over year. Its recurring sales, which include SaaS (software-as-a-services) and maintenance services, rose 18.6% to $85 million, accounting for 67.5% of total sales. Despite an uncertain macro environment, Enghouse increased operating income by 30.5% to $33.5 million in fiscal Q2.
Enghouse’s strong performance in Q2 was demonstrated by double-digit growth in revenue, profitability, and operating cash flows. Further, the company’s ability to execute and integrate acquisitions is a crucial profit growth driver.
Moreover, Enghouse stated, “Our business model continues to prioritize operational discipline as the demand for SaaS increases. Operational expenditures have shown improvement when compared to revenue both for the quarter and period to date, despite inflationary pressures and integrating acquisitions.”
Priced at 21 times forward earnings, ENGH stock trades 28% below consensus price target estimates.
