Buoyed by interest rate cuts and improving corporate earnings, Canadian stock markets have delivered impressive returns this year S&P/TSX composite index up 23.2% this year. Meanwhile, the following two stocks have outperformed the broader stock markets by returning over 40%. Let’s assess their recent performance and growth prospects to determine whether the momentum in these stocks can continue.
Celestica
Celestica (TSX:CLS) is one of the best performing stocks on the Canadian stock markets this year, with returns of over 196%. Its impressive performance in the first two quarters, along with growing demand for its products and services amid increased adoption of artificial intelligence (AI), has contributed to a rise in the company’s stock price. Amid the recent purchases, the company’s price-to-sales and NTM price-to-earnings ratios have risen to 2.5 and 44.3, respectively.
Rising demand for computing power, driven by the rapid adoption of AI, has led hyperscalers to boost their investments in data center expansion, increasing demand for Celestica’s products and services. The company also develops advanced products, such as data center switches and storage controllers, to meet the changing needs of its customers and strengthen its market position. Also, growing defense budgets amid rising geopolitical tensions could boost the financial performance of the advanced technology solutions segment.
Thanks to solid performance in the first six months and healthy growth prospects, Celestica management has raised its expectations. The updated guidance forecasts revenue growth of 19.7% year-over-year, with operating margin expected to rise to 7.4%, up from 6.5% in 2024. Meanwhile, adjusted earnings per share (earnings per share) could grow 41.8% to $5.50, while generating free cash flow of $400 million this year. Given its strong growth prospects, I believe the company’s current valuation remains reasonable, making it an attractive purchase for investors with a long-term horizon of more than three years.
Shopify
Another Canadian stock that has delivered impressive returns this year is Shopify (TSX:SHOP), which is trading 43.9% higher this year. The solid performance in the first two quarters has boosted the share price.
In the first two quarters, the company posted revenues of $5 billion, up 29% from the previous year. The strong performance of both commercial and subscription solutions drove sales. In addition, operating profit grew by 50.6%, while operating margin grew by 190 basis points to 14.9%. The company also generated free cash flow of $785 million in the first six months, representing 15.6% of total revenue.
In the meantime, I expect the upward momentum to continue, supported by a growing addressable market amid increased adoption of the omnichannel sales model and Shopify’s continued growth initiatives. The company is focused on developing and launching new products that meet the evolving needs of its customers as the ongoing trade war continues to pose challenges for small and medium-sized businesses. It is expanding its payments platform into new markets and introducing enhanced features to facilitate cross-border transactions, allowing merchants to seamlessly accept multiple currencies.
Shopify has invested extensively in AI to develop innovative products designed to attract a broader customer base and support business growth. The company also uses AI to improve operational efficiency and increase profitability. Given these growth prospects, I believe Shopify can deliver huge returns over the next three years.
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