The global equity markets had begun this month on a weaker note amid recession fears. However, lower-than-expected inflation in the United States erased these fears, driving the equity markets higher. The S&P/TSX Composite Index is up 6.7% from this month’s lows. Amid improving investors’ sentiments, you can buy the following three TSX stocks to earn superior returns.
WELL Health Technologies
WELL Health Technologies (TSX: WELL) posted an excellent second-quarter performance last week, with its top line growing by 42%. Organic growth of 21% and strategic acquisitions drove its revenue. The company had around 1.4 million patient visits during the quarter, representing a 38% increase from the previous year’s quarter.
Meanwhile, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to WELL shareholders increased by 3% to $23 million. Implementing advanced artificial intelligence tools, patient engagement technologies, digital workflow integration, and cost optimization have boosted its financials. It generated $35.2 million of cash from its operating activities. Supported by its healthy cash flows, the company repaid $14 million of debt, thus lowering its leverage ratio to 3.45.
The uptrend could continue, given the expanding addressable market, continued new product launches, and cost optimization initiatives. Growing virtual services, digitization of patient records, and adoption of software services in the healthcare industry have created multi-year growth potential for WELL Health. Moreover, WELL Health’s management raised its 2024 revenue and adjusted EBITDA guidance after reporting its second-quarter earnings. Its valuation also looks attractive, with the company currently trading at 1.1 times analysts’ projected sales for the next four quarters, making it an attractive buy.
Docebo
Docebo (TSX: DCBO) also posted a strong second-quarter performance earlier this month. Its total revenue grew by 21.7% to $53.1 million amid subscription and professional services revenue growth. It has expanded its customer base from 3,591 to 3,898 over the last four quarters while increasing its average revenue per used by 9.7% to $52,822. Supported by top-line growth, its adjusted EBITDA and EPS (earnings per share) grew by 158% and 85.7%, respectively.
Moreover, the growing usage of digital learning solutions in academics and business has increased the demand for the company’s services. Given its growing customer base, new features, and strategic partnerships, I believe the company is well-positioned to drive its financials higher in the coming quarters. Management has also raised its guidance for this fiscal year, with revenue projected to rise 18-19% while its adjusted EBITDA margin could be between 15-15.5%.
Amid its solid Q2 performance, Docebo’s stock price has increased by over 15%. Despite the recent surge, it trades at an over 24% discount compared to its 52-week high, making it an alluring buy.
goeasy
My final pick would be goeasy (TSX: GSY), a subprime lender that has outperformed the broader equity markets this year with returns of 19.3%. Its solid quarterly performances and raising of its three-year guidance have increased investors’ confidence, driving its stock price. In the first six months, the company generated $1.5 billion of loan originations, thus expanding its loan portfolio to $4.1 billion. Amid the expanding loan portfolio, the company’s top line grew by 25% to $735 million, while its adjusted operating income grew by 35% to $297 million. Its efficiency ratio, a measure of its non-interest expenses to revenue, fell 500 basis points to 27.1%.
Meanwhile, I expect the uptrend in goeasy’s financials to continue, given its expanded product offerings, robust digital infrastructure, multiple distribution channels, and expansion of new verticles, such as auto financing and retail, home, and healthcare verticals. Amid solid Q2 performance and healthy growth prospects, goeasy’s management has raised its three-year guidance, with its loan portfolio projected to grow by 45% by the end of 2026. The expansion could grow its top line at an annualized rate of 14% while raising its operating margin to 42% by 2026. Despite these healthy growth prospects, the company trades at 1.9 times analysts’ projected sales for the next four quarters, making it an enticing buy right now.
