Canada-based tech stocks pale in comparison to their U.S. counterparts. There are plenty of multi-billion tech stocks south of the border and a couple of trillion-dollar companies as well. However, over the last few years, there have been some high-growth stocks in Canada’s booming tech space that have come under the investor radar.
Here we look at two such stocks that are a solid buy for long-term investors.
Lightspeed POS Inc.
Shares of Lightspeed POS Inc. (TSX:LSPD) are trading at $31.42. The company went public in March 2019 and has almost doubled since then. However, the stock is currently trading 37% below its record high of $49.7.
The sell-off in high growth tech stocks was driven by valuation concerns and impacted Lightspeed as well. LSPD continues to trade at a premium for a reason. Its valuation is supported by high growth metrics.
LSPD is valued at $2.68 billion in terms of the market cap, or 23 times forward sales. Analysts expect LSPD to grow sales by 50% to $116.14 million in fiscal 2020 (year ending in March) and by 49.5% to $173.6 million in fiscal 2021. Though still unprofitable, LSPD is expected to improve earnings by 93.3% in 2020 and 54% in 2021.
In the fiscal second quarter of 2020, LSPD reported sales of $28 million, a growth of 51% year over year. This was ahead of the company’s guidance of sales between $26.5 million and $27 million.
The LSPD point of sales systems is now available in 57,000 customer locations and the company’s gross transaction volume rose to $5.4 billion in the September quarter. LSPD is gaining traction among U.S. customers and is hugely popular among restaurants, bakery, and fashion brands as per the company’s press release.
In fiscal 2020, LSPD forecasts sales between $117 million and $119 million, which is higher than consensus estimates. It expects to post adjusted EBITDA between -$19 million and -$21 million in 2020.
Kinaxis stock is up 57% in 2019
Shares of cloud-based SaaS (software-as-a-service) company Kinaxis (TSX:KXS) has easily outperformed the broader markets this year. The stock is up 57% year to date and has returned 687% since its IPO back in June 2014.
The company provides subscription-based software solutions to optimize supply chain operations. Kinaxis reported quarterly results on November 1 and the stock is up by 22% since then. While Kinaxis easily beat consensus estimates in the September quarter, it was also named as a leader in the Control Tower Technology Value Matrix for the third consecutive quarter by Nucleus Research.
Analysts expect Kinaxis to grow sales by 25.9% to $189.8 million in 2019 and 11% to $210.7 million in 2020. The company is expected to grow earnings by 35.1% in 2019. Kinaxis is valued at $2.68 billion or 14 times forward sales.
LSPD and Kinaxis have solid long-term potential
LSPD and Kinaxis are both part of high growth segments with an ever-expanding total addressable market. While investors might be wary of their high valuations, these stocks need to be purchased at major dips to average out the losses in a bear market. These two high growth tech companies can move higher if recession fears abide and as we move closer to 2020.
Analysts covering LSPD have a 12-month average target price of $33.42, which is 7% higher than the current price. Though analysts are bullish about Kinaxis, they have an average target price of $82.3, which is 19.6% higher than the current price.
