Investing in soaring stocks on the TSX, particularly those experiencing rapid growth or momentum, can lead to significant returns but also comes with higher risks. Historically, TSX stocks that have experienced a rapid increase in price, often defined as a 50% or more gain within a short period, can continue to outperform in the short term due to momentum. In fact, some studies show an additional average return of 10-15% over the following six months.
However, this momentum can reverse just as quickly, with many soaring stocks facing corrections of 20% or more within a year! As market conditions change or as valuations become overstretched, these returns gain collapse. Thus, while investing in soaring TSX stocks can be highly rewarding, it also requires careful risk management and an understanding of market dynamics.
That’s why today, we’re looking at three soaring stocks that offer just that — gains, but with less likelihood of a collapse. So, let’s get into it.
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Canadian Western Bank
Canadian Western Bank (TSX:CWB) has had quite a year, with its stock soaring 52% year to date. This impressive climb is largely due to its strong financial performance, as seen in recent earnings reports. The bank reported solid revenue growth and a significant improvement in its net interest margins, driven by higher interest rates and prudent cost management. CWB’s ability to navigate a challenging economic environment while still delivering robust earnings has caught the eye of investors, leading to this remarkable uptick in its stock price.
Now, is it still a buy? Despite the strong rally, CWB’s valuation remains attractive, with a forward price-to-earnings (P/E) ratio that suggests there’s room for further growth. The bank’s focus on expanding its loan book and diversifying its revenue streams continues to offer potential upside. However, with the stock already up significantly, new investors should approach with a bit of caution. Perhaps waiting for a slight pullback before jumping in. But for those already holding, it’s certainly a name to keep in your portfolio for the long term.
Stelco
Stelco Holdings (TSX:STLC) has been on a roll, rising 31% year to date, and it’s no wonder why. The company’s recent earnings have been a big driver behind this surge. Stelco reported stronger-than-expected revenue and profits thanks to robust demand for steel and efficient cost management. With global infrastructure projects ramping up and supply chains stabilizing, Stelco has been able to capitalize on favourable market conditions. Investors have taken notice of the company’s ability to generate solid cash flow, even in a tough economic environment. This has fuelled even more confidence in its stock.
But is Stelco still a buy after this impressive run? The valuation remains appealing, with a P/E ratio that doesn’t scream overvaluation just yet. Stelco’s continued focus on operational efficiency and its strategic investments in technology position it well for future growth. However, with the stock already up significantly, it might be wise for new investors to consider entering a dip or keeping a close eye on market conditions. For those already invested, holding onto Stelco could still pay off as the steel industry remains in a solid position.
GFL
GFL Environmental (TSX:GFL) has been on a green streak this year as well, climbing 21% year to date. This is largely driven by its strong financial performance and strategic growth moves. The company’s recent earnings report showed solid revenue growth, fuelled by higher waste volumes and successful acquisitions that have expanded its market reach. GFL’s ability to integrate these acquisitions effectively and improve operational efficiencies has impressed investors. This makes it a standout in the waste management sector.
But is GFL still a buy after this green streak? The stock’s valuation is on the higher side, reflecting the market’s confidence in its growth prospects. But it’s not yet at a level that should scare off potential investors. GFL’s ongoing expansion strategy and focus on sustainability initiatives position it well for continued success. If you’re looking for a solid play in the environmental services space, GFL could still offer attractive returns — especially if it keeps executing on its growth plans. Just be mindful of the price you’re paying, as the recent rise has priced in a lot of the good news.
