There’s been some significant volatility in the market in recent years. But for most growth investors, putting capital to work in top growth stocks has certainly paid off. This has been the case, to a large degree, in the Canadian stock market as well.
As we kick off a new year, expectations for how specific growth stocks will perform in 2025 vary widely. However, I think the following three growth stocks could be best positioned for a big 2025, at least as far as Canadian tech companies are concerned.
Here’s why.
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Shopify
As one of the largest publicly traded companies in Canada, Shopify (TSX:SHOP) remains a favourite as we approach the next year. A leading e-commerce infrastructure provider, Shopify is partnered with millions of small businesses as well as leading mega-cap companies and global brands. As of 2024, the company has a 30% market share among e-commerce companies and a 10% share in the United States.
Shopify’s value proposition comes from its status as an attractive solution to merchants and sellers frustrated with the largest platforms like Amazon and eBay. As more merchants subscribe to Shopify’s services, Shopify is set to grow its user base and revenue. The company’s third-quarter financial results showcase its growth potential as it has achieved 26% revenue growth and 19% growth in free cash flow.
Constellation Software
Constellation Software (TSX:CSU) is a diversified software company and a leading international provider of various software and services. The company acquires, develops and manages software businesses with a record of over 500 acquisitions since its founding.
The company’s primary business strategy involves acquiring businesses engaged in niche software applications. Constellation Software focuses on acquiring exceptional businesses based on growth, profitability and quality of management at relatively low prices.
In 2024, Constellation Software continued making valuable acquisitions, with deals amounting to $197 million in cash and $70 million in deferred payments. With strong earnings growth this year, the company has built a strong position to make further acquisitions.
As of the third quarter of FY2024, Constellation reported $2.5 billion in revenues, up 20% from the previous year. Currently, the company has $2.1 billion in cash on its balance sheet, providing a long runway for additional acquisitions (especially when factoring in the company’s operating cash flows).
OpenText
Waterloo-based OpenText (TSX:OTEX) is a Canadian information company that creates and sells enterprise information management (EIM) software and solutions. The company offers a diverse portfolio of solutions across business networks, security, developer APIs, content, digital experience, and operations management. Its customers include top global firms, government agencies, and professional service providers.
OpenText has managed to catch investors’ attention by building its cloud services, EIM and artificial intelligence (AI)-driven solutions. OpenText’s AI-based tools have become a central part of the company’s offerings, helping its clients manage data more effectively. As more companies adopt AI tools to improve their processes, OpenText stands to increase its revenues over time.
The company’s recent earnings report showed an 8.6% decline in revenue growth year on year, leading to a selloff in the company’s share price. However, OpenText’s profitability has grown, with an operating margin of 16.74% and a net income of $465 million. Moreover, the company has continued to provide investors with strong cash flows ($1 billion this past year), which it can invest in acquisitions and new technologies.
