Investing in high-quality stocks poised to steadily increase free cash flow (FCF) is a proven strategy for generating outsized returns over time. In this article, I have identified two such Canadian stocks you can buy with $7,000 right now.
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Is this Canadian stock a good buy?
Valued at a market cap of almost US$2 billion, Aurinia Pharmaceuticals (NASDAQ: AUPH) is a biopharmaceutical company that delivers therapies to people living with autoimmune diseases. It offers LUPKYNIS (voclosporin), an oral therapy that treats adult patients with active lupus nephritis.
Aurinia Pharmaceuticals reported strong third-quarter results with LUPKYNIS sales climbing 27% year over year to US$70.6 million. Its solid numbers prompted management to raise full-year revenue guidance for the second time in 2025.
The company now expects net product sales of US$265 million to US$270 million, up from its previous guidance of US$250 million to US$260 million, demonstrating continued commercial momentum for its lupus nephritis treatment.
Net income surged 119% to US$31.6 million while diluted earnings per share jumped 130% to US$0.23 compared to the prior-year period. Operating cash flow more than doubled to US$44.5 million, which indicates improving profit margins. With more than US$350 million in cash, Aurinia has the liquidity to reinvest in research and development and organic growth.
Growth drivers include a sharper commercial focus on high-volume rheumatology prescribers and continued tailwinds from the American College of Rheumatology’s 2024 lupus nephritis treatment guidelines.
Analysts tracking the biotech stock forecast revenue to increase from US$235 million in 2024 to US$468 million in 2029. In this period, free cash flow is projected to improve from US$44.11 million to US$175 million. If Aurinia stock is priced at 20 times forward FCF, it could gain 80% over the next three years.
Is this Canadian stock undervalued?
Down 28% from all-time highs, West Fraser Timber (TSX: WFG) is a diversified wood products company. Its products are sold to major retail chains, contractor supply yards, wholesalers, and industrial customers for further processing or as components for other products.
In Q3 2025, West Fraser Timber reported negative adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $144 million as the lumber industry continues to wrestle with an extended downturn.
It faced headwinds from stagnant U.S. housing starts, which averaged just 1.31 million units through August. The housing sector is held back by elevated mortgage rates that continue to dampen affordability and new home construction.
West Timber has been proactive in addressing the prolonged slump, permanently removing 820 million board feet of capacity since 2022 through mill closures across the U.S. and Canada. That represents about 12% of total lumber capacity before the cuts. Current operating rates reflect a roughly 20% to 25% curtailment of remaining capacity as management adjusts production to match tepid demand.
Analysts tracking the TSX stock forecast the company to end 2029 with free cash flow of $912 million, compared to an outflow of $322.7 million in 2025.
If West Timber stock is priced at 12 times forward FCF, which is reasonable, it could gain 45% over the next three years. If we account for dividend reinvestments, cumulative returns could be closer to 50%.
