Supported by interest rate cuts, improving macroeconomic conditions, strengthening corporate earnings, and rising commodity prices, the Canadian equity markets have generated strong returns over the past 12 months, with the S&P/TSX Composite Index climbing about 30%. Despite this broad-based rally, several stocks have lagged the benchmark in recent months due to company-specific and sector-related challenges.
Given their attractive valuations and improving growth outlooks, I believe the following two underperformers are well-positioned to deliver superior returns over the next three years.
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Lightspeed Commerce
Lightspeed Commerce (TSX:LSPD), a provider of omnichannel commerce and payment solutions operating in more than 100 countries, has seen its stock decline by over 24% during the past 12 months. A challenging macroeconomic backdrop, coupled with continued net losses – which widened to $32.7 million from $29.7 million in the prior-year quarter – has weighed on investor sentiment, dragging its share price down.
Despite these concerns, Lightspeed continues to make meaningful operational progress. The company expanded its customer base and increased average revenue per user (ARPU), driving 15% revenue growth in its recently reported second-quarter results for fiscal 2026. More importantly, profitability metrics improved sharply, with adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) rising 52.1% year over year to $21.3 million. Lightspeed also generated $18 million in free cash flow during the quarter, a significant improvement from $1.6 million in the prior-year period. The company ended the quarter with $462.5 million in cash and cash equivalents, providing ample financial flexibility to fund future growth initiatives.
Looking ahead, the accelerating adoption of e-commerce is encouraging businesses globally to embrace omnichannel sales strategies, expanding Lightspeed’s total addressable market. At the same time, the company is reinforcing its competitive position by rolling out innovative products—including AI-driven tools—and expanding its payments solutions into new geographies. Ongoing cost-optimization initiatives, such as AI-enabled streamlining of support and service operations, should further enhance operating efficiency and pave the way for sustained profitability.
Reflecting these improving fundamentals, management expects gross profit and adjusted EBITDA to grow at annualized rates of 15–18% and approximately 35%, respectively, through fiscal 2028. The stock also appears attractively valued, trading at NTM (next 12 months) price-to-sales and price-to-earnings multiples of 1.3 and 20.6, respectively. Considering its strengthening financial performance, long-term growth opportunities, and discounted valuation, I remain bullish on Lightspeed.
Northland Power
Second on my list is Northland Power (TSX:NPI), a developer, owner, and operator of a diversified portfolio of energy infrastructure assets with a total operating capacity of approximately 3.2 gigawatts. The stock has come under pressure following its third-quarter results, as net losses widened sharply to $456 million from $191 million in the prior-year period. In addition, the company’s management reduced the dividend by 40% to help fund growth projects and preserve balance-sheet strength, which weighed on investor sentiment. On the back of its recent selloff, the company has delivered a modest 2.7% gain over the past 12 months, significantly underperforming the broader equity markets.
Operationally, however, the company continues to demonstrate solid momentum. Third-quarter revenue rose 12.8% year over year, supported by growth across its offshore wind, onshore renewable and energy storage, natural gas, and regulated utility segments. While headline net losses expanded, they were primarily driven by non-recurring items, including a $140 million fair-value loss on financial instruments and a $527 million impairment charge. Excluding these one-time factors, adjusted EBITDA increased 13% year over year to $257 million, and free cash flow surged 131% to $45 million.
Looking ahead, NPI has planned to invest between $5.8 billion and $6.6 billion over the next five years, which could raise its total production capacity to roughly 7 gigawatts by the end of 2030. In parallel, management is streamlining the organizational structure and reducing operating expenses, which could generate about $50 million in annual cost savings by 2028. Supported by capacity expansion and improved efficiency, NPI expects free cash flow per share to reach $1.55–$1.75 by 2030, implying annualized growth of approximately 6%. Considering its improving cash flow profile, long-term growth visibility, and recent share price underperformance, I believe NPI can deliver superior returns over the next three years.
