Amid the uncertainty over the impact of the trade war on global economic growth, the equity markets have turned volatile over the last few months. This uncertain outlook has led to a steep pullback in some of the quality Canadian stocks, offering excellent buying opportunities. Against this backdrop, let’s look at my three top picks.
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Shopify
Shopify (TSX: SHOP), an omnichannel commerce enabler, has been under pressure over the last few weeks, losing around 25% of its stock value compared to its February highs. However, the company posted an impressive fourth-quarter performance in February, with its GMV (gross merchandise volume) growing by 26% to $94.5 billion. New product launches, an expanding customer base, and solid performance from the B2B (business-to-business) segment boosted its sales, driving its GMV. Also, its revenue and operating income grew by 31% and 60.9%, respectively. Its operating margin expanded from 13.5% to 16.5%, while its free cash flow margin increased from 21% to 22%.
Moreover, the uptrend in Shopify’s financials will continue amid the growing adoption of the omnichannel selling model, the introduction of new product launches, and its increasing penetration of payment solutions. The company has strengthened its R&D (research and development) team to develop innovative products and services. Amid these growth initiatives, the company’s management projects its topline to grow in the mid-20s in the first quarter of 2025. Also, its free cash flow margin could come in the mid-teens, an improvement from 12% in the previous year’s quarters. Considering its healthy growth prospects, investors could utilize the recent pullback to accumulate the stock to earn superior returns.
Celestica
Second on my list is Celestica (TSX: CLS), which has lost around 45% of its stock value compared to its February highs. The higher expenses of building artificial intelligence (AI) data centers in the United States and curbs on AI chip exports to China have weighed on investors’ sentiments, dragging AI stocks, including Celestica, down. However, the company’s fourth-quarter performance was solid, with its topline growing by 19% to $2.6 billion. The 30% growth from its CCS (Connectivity & Cloud Solutions) segment, with the revenue from its hardware platform solutions (HPS) rising 65%, drove the segment’s revenue.
Meanwhile, its advanced technology solutions (ATS) revenue remained flat. Amid topline growth and expansion of its operating margins, its adjusted EPS (earnings per share) grew by 44.2% to $1.11. Its free cash flows also increased by 11.3% to $95.8 million.
Moreover, the rising investments in expanding AI-ready data centres have increased the demand for Celestica’s networking and storage devices. Also, it recently acquired two new programs in which the company would help its customers build fully AI-optimized networking racks. Amid these growth prospects, the company has provided healthy 2025 guidance, with its revenue and adjusted EPS projected to grow by 10.9% and 22.4%, respectively. Also, amid the recent pullback, Celestica’s valuation has fallen to reasonable levels, with its NTM (next-12-month) price-to-earnings multiple at 16.3.
goeasy
goeasy (TSX: GSY) is another Canadian stock that has been under pressure over the last few weeks and trades at a 27% discount compared to its 52-week high. Meanwhile, the subprime lender generated around $814 million of loan originations in the fourth quarter, growing its loan portfolio to $4.60 billion. Amid expanding loan portfolio, its top line grew by 30% to $405 million, while its adjusted EPS increased 11% year over year to $4.45.
Moreover, the Bank of Canada has cut interest rates five times in a row. Falling interest rates could boost economic activities, thus driving credit demand that could benefit goeasy. The company’s expanded product offerings, strategic investments in expanding its distribution channels, and improving customer relationships could continue to drive its loan portfolio and financials. Also, its tighter underwriting requirements and next-generation credit models could lower delinquencies and drive profitability. Meanwhile, the company’s management projects its loan portfolio to grow 64% in the next three years, while its top line could increase at an annualized rate of 11.4%.
Further, goeasy has raised its dividends for 11 consecutive years and currently offers a healthy forward yield of 3.87%. It trades at an attractive NTM price-to-earnings multiple of 7.6, making it an attractive buy.
