Tech stocks have historically performed well on the TSX for Canadians. This is due to Canada’s robust innovation landscape and a growing demand for technology solutions across various sectors. In fact, over the past decade, tech companies outperformed the broader market. This growth can be attributed to the rise of software and cloud services, increased digital transformation, and a focus on tech-driven solutions, making tech stocks a savvy investment choice for those looking to capitalize on long-term trends in the Canadian economy! So, let’s get into two undervalued options.
Coveo
Coveo Solutions (TSX: CVO) is a tech stock that many investors are overlooking, even though its recent performance suggests it could be a hidden gem in the market. The company’s software-as-a-service (SaaS) subscription revenue hit an impressive $30.6 million in the first quarter (Q1) of fiscal 2025, surpassing guidance and showing a solid 7% increase from the previous year. What’s more, Coveo’s cash flows from operating activities surged 200% year over year, reaching $3.0 million. This remarkable improvement demonstrates the company’s strong operational efficiency and ability to generate cash.
Coveo’s innovative offerings, particularly in the realm of artificial intelligence (AI) and generative answering, are driving growth and positioning the company ahead of its competitors. The Coveo Relevance Generative Answering™ product accounted for approximately 20% of new bookings in the latest quarter. Thus indicating strong market demand. Chief Executive Officer (CEO) Louis Têtu noted, “Our industry-leading AI platform continues to drive positive business momentum … we believe we are well positioned against competitors when customers evaluate generative AI solutions.”
Despite these positive indicators, Coveo’s stock price has taken a hit. Now, with a 52-week share decline of 41% at writing, thus making it seem undervalued compared to its potential for growth. With a market cap of approximately $575.47 million and significant cash reserves of $167.75 million, the company has a solid financial foundation to navigate through challenges and seize future opportunities. As the demand for AI solutions continues to rise, Coveo’s innovative edge and improving financial metrics make it a compelling investment.
Lightspeed
Lightspeed Commerce (TSX: LSPD) is a tech stock that’s still flying under the radar, and savvy investors might want to take a closer look. With a market cap of $2.60 billion and a remarkable revenue growth of 27% year over year, the company is well-positioned in the booming point-of-sale and payments sector. In its recent Q1 report, Lightspeed generated total revenue of $266.1 million, exceeding expectations, while transaction-based revenue surged by an impressive 44%. Despite this growth, the stock price has seen a 52-week decline of 15.09%.
Lightspeed’s commitment to innovation is another reason it stands out as an undervalued stock. The company recently launched several new features, including an omnichannel loyalty program and enhanced inventory management tools. These are helping merchants streamline operations and improve customer experiences. Dax Dasilva, the CEO, expressed excitement about the company’s capabilities, stating, “I am thrilled to see the volume of capabilities we are releasing for our customers … Lightspeed continues to distinguish itself with advanced inventory management and B2B [business-to-business] functionality.”
Furthermore, Lightspeed’s strong cash reserves of $673.9 million provide a solid foundation for future growth and expansion. With a low debt-to-equity ratio of just 0.99%, the company has the financial flexibility to invest in new initiatives while managing costs effectively. As it continues to build on its successes, Lightspeed is not just surviving. It’s thriving in the competitive tech landscape. This includes including a projected 20% revenue growth for fiscal 2025. With strong fundamentals and innovative product offerings, Lightspeed is in an attractive market position — all of which suggests that Lightspeed is still an undervalued tech stock.
Bottom line
Both Lightspeed and Coveo are undervalued gems in the tech sector, thus showcasing strong growth potential that savvy investors shouldn’t overlook! Lightspeed is riding high on a 27% year-over-year revenue increase, driven by innovative features like its omnichannel loyalty program and a solid cash position of $673.9 million. Meanwhile, Coveo is making waves with its impressive SaaS subscription revenue of $30.6 million and a remarkable 200% improvement in cash flows from operating activities. With both companies well-positioned to capitalize on the growing demand for tech solutions, these present exciting opportunities for those looking to add promising stocks to their portfolios!
