Kalkine Media explores 5 TSX stocks to watch if recession hits

With recessionary fears ebbing among investors, the stock market may expect some changes. Although there are several factors that trigger a recession, rising inflation and interest rates are the major contributors. Investors must buckle up and safeguard their portfolios. In such scenarios, you may implement defensive as well as offensive strategies.

Amid the current economic situation, it is crucial to understand the market in detail. Further, look for stocks that have the potential to survive in the existing conditions and have the desired growth potential. The market may put you in a fix but sail through the situation like a pro.

While adding stocks to your portfolio, be careful to go the diversification way. Sticking to one stock or sector may increase the risk to your investment goals. Always weigh your risk tolerance and plan your strategy accordingly.

Here, we look at five stocks and assess them along with their financial performance in recent months:

1. Constellation Software Inc. (TSX: CSU)

Constellation Software Inc. deals in public and private sector markets and is engaged in developing and customizing software. Further, the company builds, manages and acquires vertical-specific businesses. Constellation’s portfolio includes companies from sectors such as beverage distribution, communications, credit unions, and hospitality.

In Q3 2022, Constellation’s revenue rose to US$ 1,725 million from US$ 1,299 million in Q3 2021. The net income also increased to US$ 143 million from US$ 121 million for the same period. The net cash flow from operating activities increased to US$ 321 million from US$ 292 million. Constellation Software distributes a quarterly dividend per share of US$ 1 with a dividend yield of 0.278 per cent. The EPS (earnings per share) is US$ 29.68.

2. Precision Drilling Corporation (TSX: PD)

Precision Drilling Corporation is engaged in providing Oil and gas services.  Moreover, the company works on providing contract drilling along with production services in Canada and North America.

In Q3 2022, Precision Drilling’s revenue was reported at C$ 429.33 million versus C$ 253.81 million in Q3 2021. The adjusted EBITDA rose to C$ 119.56 million from C$ 45.4 million for the same comparative period. The net earnings were posted at C$ 30.67 versus a net loss of C$ 38.03 million.

On July 18, 2022, Precision Drilling announced the acquisition of High Arctic Energy Services Inc.’s rental assets and well-servicing business.

3. Boyd Group Services Inc. (TSX: BYD)

Boyd Group Services Inc. is engaged in providing auto glass and auto body personal services. The company operates in the US and Canada. In Canada, it operates with the brand name-Boyd Autobody and Glass, while in the US, there is Gerber Collision and Glass. Further, it provides workshop facilities to its customers.

In Q3 2022, the adjusted EBITDA of the company increased to US$ 73.04 million from US$ 51.5 million in Q3 2021. The total sales grew to US$ 625.66 million from US$ 490.17 million for the same period.

The net earnings soared to US$ 11.87 million from US$ 434 million. The basic EPS increased to US$ 0.55 from US$ 0.02 in the same comparative period. Boyd Group pays a dividend of US$ 0.144 per share. The three-year dividend growth of the company was noted at 1.98 per cent with a dividend yield of 0.278 per cent. The EPS is US$ 1.2.

4. Cargojet Inc. (TSX: CJT)

Cargojet Inc. consists of domestic air cargo co-load network in Canada. The company is engaged in providing dedicated aircraft to customers on Insurance and maintenance basis.  

In Q3 2022, Cargojet’s net earnings grew to C$ 83.4 million from a net loss of C$ 12.9 million in Q3 2021. The EBITDA rose to C$ 128.4 million from C$ 33.4 million. The revenue increased to C$ 232.7 million from C$ 189.5 million. Cargojet distributes a quarterly dividend of C$ 0.286. The five-year dividend growth of the company is reported at 7.59 per cent along with an EPS of 16.78.

5. Kinaxis Inc. (TSX: KXS)

Kinaxis Inc. is a software company that is based in Canada and offers solutions for operations, sales, and supply chain management. The company operates with its flagship RapidResponse product and provides alerting and evaluation, high speed-analytics, high-speed analytics, and responsibility-based collaboration.

In Q3 2022, Kinaxis’ total revenue increased to US$ 89.49 million from US$ 64.43 million in Q3 2021. The gross profit also rose to US$ 55.1 million from US$ 42.58 million. The adjusted EBITDA reported US$ 14.8 million from US$ 12.38 million. The EPS is US$ 0.40.

 On August 16, 2022, Kinaxis Inc. acquired MPO.

The gross profit margin of Kinaxis Inc. in two different quarters:

Bottom Line

In times of recession, operate with a long-term approach and look for growth in every stock. Picking stocks for the short-term may offer you temporary returns. Back your portfolio with thorough research. It should include every aspect such as company financials, valuation, and growth aspects among others. This will lead to a holistic approach and give you the right perspective on your investment journey.  

Uncertainty and stock market are synonymous. Make sure to understand both aspects to plan an effective strategy. Investors must be prepared every time to deal with changing market trends. In addition to this, spread out your risk and opt for diversification. It is a traditional yet effective way and may help the investor to breeze through uncertainties.

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.