Despite the volatile environment, the S&P/TSX Composite Index has increased by around 20% over the last 12 months. The Bank of Canada’s interest rate cuts (four times since June) and easing inflation have improved investors’ sentiments, driving the equity markets. Meanwhile, the following three stocks have comfortably outperformed the broader equity markets in the last 12 months. Given their solid underlying businesses, healthy financials, and healthy growth prospects, I expect the uptrend to continue.
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Celestica
With impressive returns of around 280% in the last 12 months, I have chosen Celestica (TSX: CLS) as my first pick. Its solid performance in the first three quarters, new product launches, and exposure to high-growth AI (artificial intelligence) markets have increased its stock price. Meanwhile, the uptrend in the electronics manufacturing services company could continue amid strong growth in its Connectivity & Cloud Solutions (CCS) segment, which serves the communications and enterprise sectors.
The increased usage of AI has prompted hyperscalers to invest in expanding AI/ML (machine learning)-ready data centres, thus raising the demand for high-performance storage, computing, and networking hardware platform solutions. Celestica is investing in developing innovative products and making strategic partnerships, which could allow it to benefit from the expanding addressable market. Moreover, the recovery in commercial air travel and the rising defence budgets amid increasing geopolitical tensions could also improve the financials of its ATS (advanced technology solution) segment. Moreover, the company trades at a reasonable valuation despite the recent surge in its stock price, with its NTM (next-12-month) price-to-sales multiple at 1.4.
WELL Health Technologies
WELL Health Technologies (TSX: WELL), which has returned over 70% in the last 12 months, would be my second pick. Its continued acquisitions, healthy organic growth, rising patient interactions, and improving profitability have boosted its stock price. Moreover, the company is continuing with its acquisition activities by acquiring seven assets since December 2024, which could contribute $100 million to its annualized revenue while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin to remain in line with the company’s 2024 guidance. The company also has 12 letters of intent that could contribute an additional $65 million to its annualized revenue.
Further, the growing adoption of telecommunication services and digitization of clinical procedures is also expanding the demand for WELL Health’s products and services. Further, the company is also investing in AI to develop innovative products that would aid healthcare professionals in delivering positive patient outcomes. Along with these growth initiatives, WELL Health is also working on spinning off WELLSTAR Technologies, which offers a comprehensive range of products and services that meet the needs of healthcare providers. The spinoff would allow investors to invest in a pure-play tech healthcare company. Considering these growth prospects and its cheaper price-to-sales multiple of 1.5, I believe WELL Health would be an excellent buy.
Shopify
Another stock that has outperformed the broader equity markets over the last 12 months is Shopify (TSX: SHOP), which provides omnichannel commerce solutions to businesses worldwide. The tech company has risen 32% over the previous 12 months amid solid quarterly performances. In the recently reported third-quarter earnings, revenue grew 26%, marking the sixth consecutive quarter of above 25% growth. Further, its free cash flow margin has expanded sequentially in all the quarters of this year.
Moreover, the demand for Shopify’s products and services is rising amid the growing adoption of the omnichannel selling model. The commerce facilitator continues developing innovative products to help businesses boost sales, venture into new markets, and improve operating efficiencies. Also, the growing penetration of its Payments solutions could continue to drive its GPV (gross payment volume). Considering all these factors, I expect the rally in Shopify’s stock price to continue, making it a solid buy.
