Don’t Look Now, But These 3 TSX Stocks Look Poised for a Nice Rally

In This Article:

grow dividends
Image source: Getty Images

Written by Christopher Liew, CFA at The Motley Fool Canada

Lower interest rates are tailwinds for stocks and could trigger a bull run. However, the Bank of Canada still needs to decide when to start rate cuts. Some economists say the policy rate is ripe for a cut in June, while others warn it might be too soon.

Meanwhile, Canadian stocks are on a roller coaster due to rate cut uncertainties and geopolitical risks. But believe it or not, three TSX stocks continue to defy market volatility. They are outperforming with enormous upside potential.

Bright Outlook

Héroux-Devtek (TSX:HRX) reported impressive revenue and income growth in the first nine months of 2023. Sales increased 15% to $445.7 million versus the same period in 2022, while net income soared 133.2% year over year to $17.58 million. As of this writing, the industrial stock is up 28.95% year to date. The current share price of $19.60 could rise further when the full-year results come out.

The $659.6 million company operates in the aerospace & defence industry and is the world’s third-largest landing gear manufacturer. Despite the challenging supply chain environment, the stabilized production system and pricing initiatives enabled throughput and profitability to return to historical levels.

Héroux-Devtek’s president and chief executive officer (CEO), Martin Brassard, maintains a bright outlook for the aerospace market. He expects continued upward trends in sales volume and profitability that will exceed the company’s past sales and margins.

Significant pipeline momentum

Technology was the top-performing sector in 2023, but has slumped in 2024. Nonetheless, Converge Technology Solutions (TSX:CTS) outperforms with its market-beating return. At $5.32 per share, current investors are up 28.74% year to date in addition to the 0.75% dividend.

The $1.08 billion software-enabled IT and cloud solutions provider delivers artificial intelligence (AI), advanced analytics, cloud platforms, cybersecurity, digital infrastructure, and application modernization, including digital workplace offerings to clients in various industries.

Expect the rally to sustain because of the thriving business. In 2023, total revenue jumped 25% to $2.7 billion versus 2022. While the net loss for the year was $6.4 million, net income in Q4 2023 reached $4.78 million compared to the $4.65 net loss in the fourth quarter (Q4) of 2022.

Its CEO, Shaun Maine, said Converge has a significant pipeline momentum in 2024 due to the strong demand for legacy modernizations, advanced customer-centric solutions, and massive interest in AI solutions.