The Canadian technology sector is one I’d argue is very overlooked by global investors. Sure, the biggest companies in the world are located in the U.S. and China. There are plenty of world-class tech companies to consider in these key markets, and that’s why most investors spend the vast majority of their time analyzing such firms.
That said, the Canadian market is one (similar to other developed European markets), that I think does not get the attention it deserves.
With that in mind, here are three of the top Canadian growth stocks I think investors would be remiss to ignore right now.
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Kinaxis
Kinaxis’ (TSX: KXS) status as a leader in providing mission-critical supply chain software to a range of enterprise clients provides investors with exposure to some of the most stable (and fastest growing) cash flows in this sector.
Given the company’s Software-as-a-Service (SaaS) business model, Kinaxis’s reliable and consistent cash flows provide greater stability than those of many of its peers. As such, this is a stock that’s maintained a premium multiple for a long time.
Valued at around 100 times trailing earnings, it’s hard to call Kinaxis cheap, that is, unless you’re considering the company’s forward growth prospects, bolstered by AI integrations. I think these product improvements could drive growth over and above the 17% growth rate investors have enjoyed in years past.
Constellation Software
A growth-by-acquisition name that’s been beaten down considerably in recent months (thanks to slowing deal flow and lower-than-anticipated earnings growth) is Constellation Software (TSX: CSU).
I think much of this recent decline is probably warranted. Indeed, we’re now living in a “show me” market, where investors want to see earnings not only continue to grow at their past levels, but accelerate moving forward.
As an aggregator of small to mid-sized tech stocks, Constellation should have much more upside than many of its competitors, due to the fact that so many of its target acquisitions may be tied to the AI trade. The thing is, picking and choosing which companies may be profitable sooner rather than later is difficult, and the acquisition cost for such deals has climbed considerably.
That said, I think as a long-term holding, Constellation makes a heck of a lot more sense at around $3,000 per share than it did when shares of CSU stock were trading above the $5,000 level.
Shopify
One of the best tech companies North America has to offer, Shopify (TSX: SHOP) continues to be a company I’m pounding the table on here.
Shares of Shopify stock have been on a tear of late, recently making a new all-time high in October. That said, shares of the e-commerce platform provider have also come down of late, as investors attempt to discern what the correct valuation multiples should be for these fast-growing names.
And fast-growing Shopify is. This past quarter, the company brought in revenue growth of nearly 32%, with GMV also climbing by 32% amid processed volume, which surged by 67%. Those are incredible growth rates, and given the surge in e-commerce holiday spending (which came at the expense of brick-and-mortar retailers), I’m expecting the company’s Q4 release to show similar metrics.
