The overall investing environment for tech and growth investors is one which is hard to nail down right now. There are a number of impressive technology-focused growth stocks out there which are outperforming the market. However, within the TSX, finding companies with both strong momentum and long-term growth upside (in excess of the market) may yield fewer options than investors may initially get excited about.
That said, I do have two top TSX tech picks I think can continue to outperform over the long term. Here’s more on why these companies are high on my watch list right now, and what I’m specifically looking at when it comes to both.
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Kinaxis
Kinaxis (TSX:KXS) has quickly become one of the top TSX tech stocks that’s on my radar right now. Some of that has to do with the company’s recently announced AI-powered solutions aimed at helping its growing clientele solve difficult supply chain challenges. Indeed, in the race for AI dominance, companies everywhere are looking to develop the best solutions. On this front, Kinaxis has done a compelling job.
However, I’m also looking at Kinaxis’ core business model as a key reason why I’m considering owning this Canadian tech company for greater growth exposure. Operating a software-as-a-service business model, Kinaxis has seen strong revenue growth (top-line growing 16% year-over-year this past quarter). As the company’s customer base jumps onto Kinaxis’ AI-powered solutions, I’d expect these numbers to continue to trend higher.
If Kinaxis can see the kind of adoption boost of its core RapidResponse system that many analysts expect, this is a stock looking very attractively priced right now. As EBITDA continues to rise (46% this past quarter), with strong margin expansion (25% this past quarter), there’s a lot to like about this company’s upside moving forward.
Shopify
No list of top Canadian tech stocks can ever really be complete without talking about e-commerce juggernaut Shopify (TSX:SHOP).
Shopify’s long-term stock chart shown above highlights what investors can expect from this name. A highly valued growth stock benefiting from strong secular tailwinds in the e-commerce space, adoption of the company’s e-commerce solutions has been bumpy, to say the least, since the onset of the pandemic.
That said, as more retail activity moves online, there’s a lot to like about how Shopify has positioned its offerings relative to its peers. The company has continued to produce double-digit growth in free cash flow, with profitability on the rise (its seventh straight quarter doing so). That’s the sort of metric I’m watching closely, and one which I think should drive continued value and (hopefully) the stock to new all-time highs in short order.
Now, both stocks are certainly not cheap by any conventional metric. But investors are paying up for quality. And in this environment, I think that’s a smart move.
