The Canadian tech sector is chock full of growth stocks long-term investors have done well owning, particularly during this most recent bull market following the Global Financial Crisis.
Indeed, the tech sector continues to be on a roll, as investors look for any way to play the surge in adoption AI should bring to many top technology platforms. I’m going to highlight three such players I think could have massive upside on the TSX, and why now is the time to consider diving into these particular names.
Without further ado, let’s dive in!
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Open Text
Open Text (TSX: OTEX) is among the leading Canadian software providers that’s yet to see a significant uptick despite its strong fundamentals.
This is a stock that’s down over the past year, and down roughly 30% over the past five years. No doubt, some investors may be wondering why this stock made the list to begin with.
For one, I think Open Text has among the most attractive valuations in its sector, with a price-earnings ratio of just 12 times. That’s less than half the industry average, and one that’s not pricing in a heck of a lot of growth moving forward.
Now, the company did see revenue decline by around 13% on a year-over-year basis, so some of this discount is warranted. But for long-term investors who believe the company can return to growth, it may be worth picking up shares before this stock rebounds. That’s the approach I think makes the most sense right now.
Constellation Software
Constellation Software (TSX: CSU) is the next top tech stock on my list. That’s for good reason.
The stock chart above tells a story that I think is really compelling. The company’s long-term growth trajectory is truly world-class, and Constellation Software remains one of my top bullish picks in this sector for this reason.
Of course, past performance is no guarantee of future results, and plenty will need to go right for the company to see the kind of continued growth many investors are expecting.
That said, the company’s long-term growth profile has been driven by an acquisition model that still holds. Constellation continues to acquire and integrate small and mid-cap tech companies into its portfolio, improving their ROI as the company grows. Until the tech market becomes less fragmented and owner-operators choose not to sell, this is a stock to simply hold and buy more on dips.
Kinaxis
As far as Canadian tech stocks are concerned, Kinaxis (TSX: KXS) is the latest addition to my watch list of stocks I think investors may want to have a closer look at.
Kinaxis’ upside really comes from the company’s recent AI integrations, with its core platform seeing strong growth in recent quarters. The company’s revenue is expected to grow at a double-digit pace in the coming years, with recent quarters seeing robust growth of a similar magnitude. Indeed, if the AI revolution is as big as everyone’s saying and these are the results of the company’s efforts thus far, I think there’s more upside on the table long term.
The company’s valuation is much steeper than that of most in the Canadian tech sector. But with the sort of fundamental growth drivers Kinaxis has at play, there are few better options in the market right now in my view.
