Despite the volatility in the last few days, the Canadian equity markets have continued their uptrend, with the S&P/TSX Composite Index rising 3.6% this month. Amid investors’ optimism, here are four Canadian stocks that can outperform the broader equity markets over the next three years.
The cooldown of oil prices amid the fears of a third-wave of COVID-19 cases globally have dragged Suncor Energy’s (TSX:SU)(NYSE:SU) stock price down by around 10% from its recent highs. Despite the near-term weakness, the company’s outlook looks healthy, given the expectation of oil demand recovery amid improvement in economic activities and economic expansion. With its integrated business model and long-life, low-decline assets, the company is well positioned to take advantage of higher oil prices.
Further, Suncor Energy’s management expects its production and refineries utilization rate to improve this year, while its operating expenses could fall. Higher oil prices and improving operating metrics could boost its margins and earnings in the coming quarters. The company also pays quarterly dividends, with its forward dividend yield standing at 3.2%.
Lightspeed POS (TSX:LSPD)(NYSE:LSPD) has lost over 28% of its stock value from its recent highs. The sell-off in high-growth tech stocks amid the concerns over high valuations and the expectation of life returning to pre-pandemic ways amid the vaccination drive have dragged the company’s stock price down.
However, Lightspeed POS’s growth prospects look healthy. Many businesses have shifted to omnichannel solutions amid the pandemic, which has created long-term growth potential for Lightspeed POS. Further, the company has adopted an aggressive acquisition strategy to strengthen its competitive positioning and expand its geographical footprint. It also recently raised US$676.2 million, which could support its growth initiatives. So, given its high-growth prospects, I believe investors should utilize the sell-off to accumulate the stock for higher returns.
Amid the fears of speculative trading, cannabis stocks have been under pressure for the last few weeks. Canopy Growth (TSX:WEED)(NYSE:CGC) has lost close to 44% of its stock value from its 52-week highs. The pullback offers an excellent buying opportunity, given the expanding cannabis market amid increased legalization and its growth initiatives.
Canopy Growth’s management has set a promising outlook for the next three fiscal years. The management expects its top line to grow at a CAGR of 40-50% during this period. Its adjusted EBITDA could turn positive in the second half of fiscal 2022 and could reach an adjusted EBITDA margin of 20% by fiscal 2024. With its cash and cash equivalent standing at $1.59 billion as of December 31, Canopy Growth is well positioned to fund its growth initiatives.
After delivering an impressive return of close to 110% in the last two years, TransAlta Renewables (TSX:RNW) is under pressure this year, with its stock price trading 6.8% lower. However, the company’s growth prospects look healthy. TransAlta Renewables is looking at strengthening its footprint in Canada, Australia, and the United States.
The company is working on closing the acquisition of three facilities in the United States, increasing its production capacity by 303 megawatts. Further, it has around 2.9 gigawatts of projects under evaluation. So, given its healthy growth prospects and sectoral tailwinds, TransAlta Renewables could outperform the broader equity markets over the next three years. The company also pays monthly dividends of $0.07833 per share, with its forward dividend yield standing at 4.6%.
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The Motley Fool owns shares of Lightspeed POS Inc. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.
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