5 TSX Stocks to watch amid slowing inflation

Recently, high-interest rates and inflation have affected the economy and the stock market. Further, it brought uncertainty among the investors and the stocks.

At the moment, inflation appears to have eased a bit. According to the report by Statistics Canada, consumer inflation had slowed down to 6.9 per cent in October after rising over eight per cent in the month of June.

In recent times, the market has been under volatility and downturns. But with the slowing inflation and interest rate hikes, the market may witness a rebound. Meanwhile, with the changing market condition, the investors may have to change their approach. While selecting your stocks, look for past market trends and company valuations.

With new factors governing the market, there are several risks involved too. Work on your risk mitigation strategy and spread the risk evenly. With the market moving towards recovery, investors must have clarity on the entire market and its functioning. Every investor may differ in their needs and risk appetite. Hence, no one strategy works for all.

Make sure to align your current strategy with your portfolio needs. Also, do not let market speculations hinder your stock decisions. In this roller-coaster ride, fasten your portfolio with the right understanding and market analysis. Amid the slowing inflation, here are five stocks to assess, along with their recent financial highlights:

1. Open Text Corporation (TSX: OTEX)

Open Text Corporation is a software company that facilitates the user to retrieve, archive, aggregate and search unstructured information like-mail presentations, documents etc. The company works on providing secure and scalable solutions for consumers at a global level including governments, SMBs, and global enterprises.   

In Q1 FY 2023, Open Text’s revenue increased and was reported at US$ 852 million from US$ 832.3 million in Q1 FY 2022. The gross profit rose to US$ 593.68 million from US$ 574.18 million for the same comparative period.

As on September 30, 2022, the cash and cash equivalents soared to US$ 1,704.38 million from US$ 1,693.74 million on June 30, 2022.

Open Text Corporation’s dividend yield was noted at 3.335 per cent with a quarterly dividend per share of US$ 0.243. The company’s five-year dividend growth was posted at 12.24 per cent.

2. Descartes Systems Group Inc. (TSX: DSG)

The Descartes Systems Group Inc. provides software to facilitate communication within the shipping industry. Global Logistics Network is the company’s core product, and it charges its clients for sending/receiving messages, documents and data.

In Q2 FY 2023, Descartes Systems Group’s revenue rose to US$ 123 million from US$ 104.6 million in Q2 FY 2022. The gross margin grew to 77 per cent from 76 per cent for the same comparative period. The cash provided by the operating activities remained unchanged at US$ 46.4 million.

Meanwhile, Descartes’ net income decreased to US$ 22.9 million from US$ 23.2 million. The adjusted EBITDA jumped to US$ 54 million from US$ 45.9 million for the reported quarter. Descartes Systems Group’s EPS is at US$ 1.38.

3. goeasy Ltd. (TSX: GSY)

goeasy provides financial services to cater to the need for owning computers, appliances, furniture etc. Further, the company offers home electronic products, furnishings, and appliances under monthly or weekly leasing agreements.  

goeasy’s revenue in Q3 2022 was reported at C$ 262.21 million compared to C$ 219.76 million in the same quarter of the previous year. Meanwhile, the operating income soared to C$ 91.37 million from C$ 81.35 million.

The EBITDA declined to C$ 105.28 million from C$ 116.69 millio and the free cash flow rose to C$ 95.58 million from C$ 89.24 million.

goeasy reported loan growth of 117 per cent to C$ 219 million. It distributed a quarterly dividend per share of C$ 0.91 and posted its three-year dividend growth of 37.14 per cent. The company’s EPS is C$ 9.85.

Market Capitalization of OTEX, DSG, GSY, QSR and SHOP:

4. Restaurant Brands International Inc. (TSX: QSR)

Restaurant Brands International Inc. is a restaurant company that generates its revenue through retail sales at its company-owned restaurants. It also generates lease income and royalty fees from franchised stores, and its Tim Hortons supply chain operations.

In Q3 2022, Restaurant Brands’ total revenues soared to US$ 1,726 million from US$ 1,495 million in Q3 2021.

The net income grew to US$ 530 million from US$ 329 million for the same comparable period. Meanwhile, the adjusted EBITDA jumped to US$ 642 million from US$ 607 million. Restaurant Brands paid a quarterly dividend of US$ 0.54 per share and its dividend yield is 3.342 per cent. The company’s five-year dividend growth was posted at 25.6 per cent.

5. Shopify Inc. (TSX: SHOP)

Shopify  operates as an e-commerce platform for small and midsize businesses. The company operates under two segments-subscription solutions and merchant solutions.

The subscription solutions facilitate the company’s merchants to carry out e-commerce on different platforms. Meanwhile, merchant solutions facilitate e-commerce, including company payments, capital, and shipping.

In Q3 2022, Shopify reported gross profit at US$ 662.33 million versus US$ 608.9 million in Q3 2021. The company’s revenue soared to US$ 1,366.2 million in the same period from US$ 1,123.7 million. Shopify witnessed a net loss of US$ 158.4 million versus net income of US$ 1,148.43 million for the reported quarter.

On July 8, 2022, Shopify completed its acquisition of Deliverr, Inc.

Bottom Line

With this slowed inflation, you can operate in the market with a diversified approach and long-term strategy. Additionally, keep in mind your investment goals and align your stock selection with the same. For this, it is vital to assess the current factors along with the past ones. Having an overall view of the market brings in a practical approach and realistically drives the portfolio.

Please note, the above content constitutes a very preliminary observation based on the industry and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.