The TSX has been sluggish lately, although there are outperforming stocks, notwithstanding the elevated volatility. Badger Infrastructure Solutions (TSX:BDGI), Shawcor (TSX:MATR), and Ero Copper (TSX:ERO) are attractive to investors because of their market-beating returns thus far in 2023.
However, the three TSX stocks might be too expensive to buy today. A retreat is also possible after a surge. Exercise caution and evaluate their earnings growth or earnings potential first. Read on to find out whether they are worth buying.
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Strong market demand
Badger Infrastructure trades at $33.95 per share and enjoys a 28.9% year-to-date gain versus the TSX’s +2.55%. It provides non-destructive hydro-excavation services to Canadian and American customers (private and public). Badger Hydrovac is a key cutting-edge technology for safe excavation around critical infrastructure and in congested underground conditions.
The $1.17 billion company caters to infrastructure industry segments such as energy, industrial, oil & gas, telecommunications, transportation, and, prominently, commercial construction. In the second quarter (Q2) of 2023, revenue jumped 19% year over year to a record second-quarter revenue of US$171.9 million.
Meanwhile, net earnings soared 129.2% to US$11 million. Badger’s president and chief executive officer (CEO) Robert Blackadar said, “We are now in our busy construction season, and our focus on sales, pricing and asset utilization continues to drive revenue growth and our bottom-line margins.”
Badger is well positioned to capitalize on the strong demand in its end markets, which include infrastructure, energy and non-residential construction, for the rest of the year.
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Rebranding and transformation
On June 7, 2023, Shawcor rebranded to “Mattr” to confirm its transformation from an energy services organization into a materials technology company. This $1.34 billion growth-oriented company operates in and serves global infrastructure markets. At $19.31 per share, the stock is up 40.54% year to date.
According to Mike Reeves, Mattr’s president and CEO, the rebranding marks a new chapter for the organization. It also aligns with the fundamentally transformed portfolio. He said, “As we look to the future, we will leverage our new image, our differentiated offerings and our underlying core competencies in materials technology.”
In the first half of 2023, revenue and net income rose 33.1% and 198.1% year over year to $765 million and $38.25 million. Reeves added, “We believe Mattr is very well positioned to accelerate value creation for all stakeholders over the coming years.” Besides the strong balance sheet, there are clear opportunities for high-return organic and inorganic growth.
Clean copper producer
Ero Copper is a top-performing, high-flying mining stock with its 54.35% year-to-date gain ($28.77 per share). The $2.68 billion clean copper producer conducts its mining and development operations (Caraíba and Xavantina) in Brazil. A construction stage project (Tucumã) will double Ero’s annual copper production by 2025.
In the first half of 2023, revenue and net income declined 8% and 29% to $205.9 million and $54.4 million compared to the same period in 2022. Despite higher copper production in Q2 2023, revenue and net income decreased due to lower copper prices. Nonetheless, cash flow from operations climbed 238.4% to $55.5 million versus Q2 2023.
Management expects copper production to decline slightly in Q3 2023 and improve in Q4 2023.
Better choices
Badger Infrastructure and Shawcor (Mattr) are better choices over Ero Copper. They can sustain momentum due to their robust earnings and visible growth potential.
