A company’s earnings growth is a key driver of its stock price. Historically, the majority of companies that have delivered consistent earnings growth over time have generated outsized gains for shareholders. Here are two such TSX stocks that are positioned to drive the bottom line higher, according to consensus estimates. Let’s see if you should invest in these two stocks right now.
Trisura Group stock
Valued at $1.9 billion by market cap, Trisura Group (TSX: TSU) is a specialty insurance company operating in the surety, risk solutions, corporate insurance, and reinsurance businesses. It offers contract surety bonds, commercial surety bonds, and fiduciary bonds to private companies, governments, and regulatory bodies.
Trisura has grown its revenue and operating income at a stellar pace in recent years. Its sales have increased from $136.7 million in 2019 to $3.07 billion in the last 12 months. In this period, its operating income has risen from $3.7 million to $122.8 million, while the net income has grown from $5.1 million to $89.7 million.
Analysts tracking Trisura stock expect its adjusted earnings to expand from $2.34 per share in 2023 to $3.16 per share in 2025. So, priced at 12.5 times forward earnings, Trisura trades at a cheap valuation. Moreover, Trisura’s free cash flow margin is much higher after excluding non-cash expenses. In the last four quarters, Trisura has reported a free cash flow of $209.5 million, indicating a 7% margin higher than its net income margin of just 3%.
Analysts remain bullish on Trisura stock and expect it to gain almost 50% in the next 12 months.
MDA Space stock
Valued at $1.8 billion by market cap, MDA Space (TSX: MDA) designs, manufactures, and services space robotics, satellite systems, components, and intelligence systems in Canada, the U.S., and other international markets. It offers geo-intelligence solutions that provide satellite-generation imagery and analytic services to deliver insights in verticals such as national security, climate change, and maritime surveillance. Moreover, MDA provides robotics and space operations that enable space exploration by offering autonomous robots and vision sensors.
MDA Space ended the second quarter (Q2) of 2024 with a backlog of $4.6 billion, an increase of 318% year over year, providing investors with enough revenue visibility, given its sales have totalled $861 million in the last 12 months.
MDA Space’s sales increased 23% year over year to $242 million in Q2, while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose 21% to $48.7 million.
The company raised its full-year revenue guidance to $1.02 billion and $1.06 billion, above the previous guidance of $950 million and $1.05 billion, indicating a 30% growth at the midpoint guidance. Moreover, its EBITDA is forecast at $200 million and $210 million, indicating a margin of 20%. MDA Space continues to invest heavily in capital expenditures, which is forecast between $200 million and $220 million this year.
Analysts tracking the TSX stock expect adjusted earnings to grow from $0.42 per share in 2023 to $0.95 per share in 2025. So, priced at 15 times forward earnings, MDA stock trades at a 20% discount to consensus price target estimates.
