Some people evaluate investment prospects based on the business model and how it helps to deliver profits. It’s also the window to the activities, especially the company’s cash-generating ability. Lastly, it will tell you if the business is resilient and adaptable to changes.

Several Canadian companies have strong fundamentals based on business models, but Alimentation Couche-Tard (TSX:ATD) stands out. It boasts a highly profitable business because of the significant market share in the convenience stores and gas stations industries. More smart money will likely pile into this industry leader in 2025.

Recession resilient

Couche-Tard is not immune to market volatility, but the business endures regardless of economic cycles. The $74.5 billion company operates more than 16,800 stores across Canada, the U.S., Europe (14 countries), and other international markets (16 countries and territories).  

In October 2024, the convenience store giant made an offer to acquire its Japanese rival, 7-Eleven. Even if the persistent but friendly approach fails, Couche-Tard said it will never cease to grow. The vision is to become the world’s preferred destination for convenience and mobility, while the mission is to make customers’ lives a little easier every day.

According to management, the company is well-positioned to capture end-to-end value dynamically as market conditions change. Moreover, the fragmented U.S. market provides consolidation opportunities.

Couche-Tard is a dividend aristocrat owing to 14% consecutive years of dividend increases. At $78.56 per share, the yield is a modest but safe 0.9% (19.17% payout ratio).

Financial performance

In the first half of fiscal 2025 (six months ending October 13, 2024), total revenues increased 11.3% year over year to US$35.7 billion. Net earnings declined 9% to US$1.5 billion from a year ago. Its president and chief executive officer, Alex Miller, said the convenience store and fuel business were lower-than-expected in second-quarter (Q2) fiscal 2025 because of controlled spending by customers.

Nonetheless, Couche-Tard’s chief financial officer, Filipe Da Silva, notes the sequential monthly improvements in same-store merchandise revenues and positive momentum going into Q3 fiscal 2025. “As we continue to pursue growth opportunities, our strong balance sheet and disciplined capital deployment will support our proven long-term goal of creating value for our shareholders,” he said.

Effective M&A strategy

Couche-Tard’s extensive network today results from its expertise in closing and integrating mergers and acquisitions globally. Around 73% of the total network was from merger and acquisition (M&A) activities. The solid balance sheet enables the company to invest or pursue deals of any size that return 11% to 15% on capital deployed.

M&As are ongoing concerns, particularly in the U.S., where many competitors are single-store operators. In highly attractive expansion markets like Latin America and Southeast Asia, Couche-Tard intends to find partners with strong management teams and build a platform. A near-term plan is to penetrate key European markets to bolster its regional position.

Competitive advantages

Couche-Tard’s global scale and diversified business are competitive advantages and long-term growth drivers. Added tailwinds this year are healthy fuel margins, easing inflation, and the Bank of Canada’s rate-cutting cycle. Expect fantastic reverse synergies and more business growth with the GetGo Cafe Markets transaction in the U.S. closing in 2025.  

The post Canada’s Smart Money Is Piling Into This TSX Leader appeared first on The Motley Fool Canada.

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• RRSP Investors: 3 TSX Stars for Tax-Efficient Wealth
• 5 Stocks for Canadian Value Investors
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• Got $3,500? 3 Consumer Stocks to Buy and Hold Forever

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool has a disclosure policy.

The Canadian energy sector is finally showing some life. It started growing in the last days of 2024, and the bullish phase continues. The S&P/TSX Capped Energy Index climbed almost 9% over two weeks, indicating strong momentum. While there are many stocks you can buy to leverage this trend, there is one Canadian producer that might be a good pick, even if the current trend doesn’t last long.

The company

Parex Resources (TSX:PXT) is an energy producer listed and trading in Canada but operating exclusively in Colombia. It’s the country’s largest independent energy exploration and production company, with significant land holdings and production outputs.

These outputs and their slashed projection were one of the reasons the company stock slumped last year, but that doesn’t undermine the company’s fundamental strengths.

A totally foreign operation is one of these strengths. With the company operating outside Canada, it has more buffer to survive local headwinds. That doesn’t mean it’s not impacted by energy trends in Canada or even the Canadian energy sector’s performance, but the impact is modestly cushioned.

But on the flip side, it can also cause the stock to slump even when the rest of the energy sector is thriving, which happened in the second half of 2024.

Reasons to buy this stock

There are many reasons to consider Parex Resources as your top energy pick right now, starting with its price-to-earnings ratio of 4.1, which makes it one of the most undervalued stocks in the energy sector right now.

Another promising aspect of the company that might encourage investors is insider buying. In the last six months (when the stock was discounted), insiders have bought a significant number of shares in the company and there is no major insider selling.

Lastly, the reason this company is getting on many dividend investors’ radar is its generous 9.9% yield. It was in double digits a while ago, but the stock has started on a slow recovery path, so the yield is falling. The dividends are also financially viable and backed by a solid payout ratio of 44%. The company is also growing its dividends at a healthy pace.

Foolish takeaway

Assuming that this energy stock is on a recovery journey, the 46% discount it is trading at might be the most compelling reason to buy this stock. Even if the recovery takes time, the dividends add another layer of attraction to the stock.

In addition to these factors, the stock has also shown adequate resilience over the years, and combining it with its operational advantage, it’s reasonable to assume that it might survive a wide range of headwinds and negative market dynamics.

The post Energy Sector Strength: A Canadian Producer That Can Thrive in Any Market appeared first on The Motley Fool Canada.

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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Parex Resources. The Motley Fool has a disclosure policy.

The Canadian stock market ended 2024 on a strong footing as gradually easing inflationary pressures encouraged central banks in the United States and Canada to slash interest rates. As a result, shares of many growth-oriented companies surged. Among the TSX’s standout performers, two stocks have caught my attention for their exceptional growth potential and ability to thrive in Canada’s improving economic environment, both of which are part of my portfolio.

In this article, I’ll highlight these top TSX stocks I’m betting on to be among Canada’s biggest winners in 2025 and tell you why now is the perfect time to get in.

Aritzia stock

Aritzia (TSX:ATZ) rewarded investors with a solid 94.3% gain in 2024 as the company posted robust earnings growth despite a weak consumer spending environment. ATZ stock currently trades at $58.17 per share with a market cap of $6.5 billion.

In the first half (ended in August 2024) of its fiscal year 2025, the Vancouver-based apparel designer and retailer’s total revenue rose 11.8% YoY (year over year) to $1.1 billion as its sales in the United States continued to strengthen. More importantly, its adjusted earnings in these six months jumped 231% YoY to $0.43 per share, driven by robust cost management and strong revenue growth. These numbers reflect the results of Aritzia’s strategic focus on expanding its retail footprint in high-growth markets.

In addition, the company is also improving its e-commerce platform, which is gradually becoming an important growth driver. In the second quarter of fiscal 2025 alone, this segment accounted for nearly 31% of its total sales, fueled by targeted digital marketing efforts and a strong response to its seasonal product launches in the U.S. market.

As declining interest rates improve the consumer spending environment, Aritzia could benefit from the expected surge in the demand for its products. Also, its strategic investments in digital and physical retail channels are likely to further accelerate growth. These factors could help ATZ stock sustain its upward momentum and deliver strong returns for investors in 2025 and beyond. Note that Aritzia is gearing up to announce its third-quarter earnings on January 9, which could make its stock volatile.

Celestica stock

After skyrocketing by 242% in 2024, Celestica (TSX:CLS) stock has started the new year on a strong note, currently trading with nearly 7% year-to-date gains. With this, CLS stock is at $141.65 per share and has a market cap of $16.3 billion.

Celestica mainly focuses on providing manufacturing and supply chain solutions to some of the world’s most innovative companies. Its ability to adapt to evolving technological trends has been a key driver of its success in recent years. In the September 2024 quarter, the Toronto-based company’s revenue exceeded the high end of its guidance range by rising 22.3% YoY to US$2.5 billion. Its adjusted quarterly earnings jumped 60% from a year ago to US$1.04 per share.

As Celestica continues to benefit from new strategic partnerships in 2025, including its collaboration with Groq in artificial intelligence, it could benefit from growing demand in the tech sector.

The post Canada’s Biggest Winners in 2025? My Money’s on These 2 TSX Stocks appeared first on The Motley Fool Canada.

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Fool contributor Jitendra Parashar has positions in Aritzia and Celestica. The Motley Fool has positions in and recommends Aritzia. The Motley Fool has a disclosure policy.

Investing in stocks offering solid total returns—a combination of stock price appreciation and dividends is a powerful strategy to build wealth over time. Thankfully, the TSX has several fundamentally strong stocks offering growth and income. Moreover, investing in these stocks via the Tax-Free Savings Account (TFSA) can significantly enhance your returns. TFSA is an exceptional tool for compounding your wealth over time without the drag of taxes eating into your returns.

With this background, here are three Canadian stocks to invest your TFSA money in 2025.

Canadian Natural Resources stock

Canadian Natural Resources (TSX:CNQ) could be a solid addition to your portfolio for generating stellar total returns. This Canadian oil and gas producer is known for generating strong earnings and cash flows that support its dividend payments and stock prices.

It’s worth noting that Canadian Natural Resources has been consistently increasing its dividends. For instance, it has raised its dividend for 25 consecutive years. Over this period, the company’s dividend grew at a compound annual growth rate (CAGR) of 21%.  

Besides higher dividend payments, Canadian Natural Resources stock has grown at a CAGR of about 24% in the last five years, delivering overall capital gains of about 194.6%.

Canadian Natural Resources’s long-life, low-decline assets, operating efficiency, and strong balance sheet position it well to grow its earnings. This will support its higher payouts and stock price. Moreover, its well-balanced production, focus on strategic acquisitions, and opportunities from low-capital, high-growth projects further enhance its ability to generate sustainable cash flows. These factors provide a solid base for growth.

Canadian Natural Resources offers a quarterly dividend of $0.563 per share, translating to a yield of 4.6%. Importantly, its payouts are backed by sustainable free cash flow, making it a dependable bet for investors looking for solid total returns.

Brookfield Asset Management stock

Brookfield Asset Management (TSX:BAM) is a compelling investment for investors looking for income and growth. This alternative asset manager is positioned to capitalize on tailwinds from the energy transition, artificial intelligence (AI) infrastructure, and credit markets.

Brookfield’s early investments in sectors such as data centres, renewable power, nuclear energy, and semiconductor manufacturing have anchored its growth trajectory. These industries are experiencing long-term investment cycles, providing a solid foundation for growth.

Thanks to the company’s asset-light model, focus on high-quality investments, exposure to fast-growing sectors, and focus on enhancing shareholder value, Brookfield Asset Management stock has surged over 58% in the past year. Moreover, it offers an attractive yield of 2.7%.

The company’s payouts are supported by its fee-related income, which adds stability. Moreover, the company is focusing on growing fee-bearing capital, which will boost its earnings and support higher payouts in the coming years.

Alimentation Couche-Tard

Canadian investors could consider Alimentation Couche-Tard (TSX:ATD) for their TFSA portfolio. It operates a network of convenience stores, supplies fuel, and offers electric vehicle (EV) charging. Thanks to its diversified revenue base and value proposition, Alimentation Couche-Tard consistently delivers solid financials, which enables it to grow its dividends and supports its share price.

Couche-Tard’s revenues grew at a CAGR of 6.2% over the past decade. At the same time, its per-share earnings increased at a CAGR of 15.2%. Thanks to its growing earnings base, Couche-Tard’s stock price climbed over 94% over the past five years, generating an average annualized return of 14.2%.

Moreover, the retailer’s solid earnings growth enables it to return higher cash. Notably, its dividends grew at a CAGR of 25.6% in the last 10 years.

Couche-Tard’s extensive network of stores, increased penetration of private-label products, and value proposition will likely drive its financials. Further, its expanding EV charging footprint, strategic acquisitions, and customer loyalty augur well for future growth.

The post Where to Invest Your 2025 TFSA Money for Total Returns appeared first on The Motley Fool Canada.

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• 5 Stocks for Canadian Value Investors

Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Brookfield Asset Management and Canadian Natural Resources. The Motley Fool has a disclosure policy.

Investing in fundamentally strong stocks can help create substantial wealth over time. Moreover, investors can start investing in high-quality TSX stocks with as low as $50. Against this background, here are three TSX stocks with solid growth potential. Notably, their low dollar price and ability to generate significant cash flows make them a no-brainer investment.

SECURE Energy Services

SECURE Energy Services (TSX:SES) is a compelling long-term stock trading under $50. This leading waste management and energy infrastructure company has a resilient business model and generates solid free cash flow that supports its dividend payments and stock price.

The company offers essential processing, recycling, and disposal solutions to its customers. Its portfolio includes difficult-to-replicate assets that operate in markets with high barriers to entry, giving the company a competitive edge. Moreover, its ability to generate stable and recurring cash flows—approximately 80% of its volumes come from production-related and recurring waste streams, adds stability. Additionally, its long-standing relationships with top-tier producers ensure a steady revenue base, enhancing the company’s financial resilience.

The company focuses on long-term growth projects supported by commercial agreements that guarantee reliable volumes and recurring cash flows throughout the contracts. This approach secures a minimum rate of return on investments and ensures predictable financial performance.

SECURE has also taken strategic steps to streamline its operations. By divesting non-core assets, the company has achieved consistent growth, margin expansion, and increased cash flow generation. These improvements have enabled SECURE to significantly reduce its debt, creating ample financial flexibility to capitalize on growth opportunities.

With industry demand trending upward and the integration of recent accretive acquisitions, SECURE is positioned for continued growth. The company’s growing earnings and cash flows could increase its stock price and support its future payouts.

5N Plus

5N Plus (TSX:VNP) is another attractive TSX stock to buy under $50. It produces specialty semiconductors and performance materials and is poised to benefit from its leadership in most markets it serves. Its products have applications in several high-growth industries such as renewable energy, space, pharmaceutical, medical imaging, security, and industrial. This provides a solid base for long-term growth.

5N Plus holds a dominant position in the specialty semiconductors segment and is a leading supplier of ultra-high purity semiconductor compounds outside of China. Further, long-term partnerships with key customers ensure a stable revenue stream. 5N Plus will gain from increasing demand for renewable energy solutions and space-based solar power technologies. These sectors, along with applications in sensing and medical imaging, provide significant growth potential for the company in the years ahead.

The company’s performance materials segment will likely deliver solid growth led by health and pharmaceutical products. These offerings deliver high profitability and predictable cash flows, contributing to the company’s financial stability. Moreover, 5N Plus is exploring additional growth opportunities through product expansion and partnerships and is poised to deliver solid growth.

CES Energy Solutions 

CES Energy Solutions (TSX:CEU) presents a compelling long-term investment opportunity under $50. The company produces advanced chemical solutions for the energy industry. With an asset-light business, extensive presence across key U.S. oil basins, and steady revenues from production chemicals, CES is well-positioned to generate robust free cash flows regardless of commodity cycles.

Notably, the increasing complexity of oil and gas extraction processes will fuel demand for CES’s specialized offerings. Further, as operators adopt more advanced drilling techniques, CES stands to gain from increased demand for its innovative production and drilling chemicals designed to enhance efficiency and maximize output.

Additionally, CES will benefit from the growing adoption of advanced chemical technologies and steady upstream activity across North America. Moreover, its vertically integrated business structure and strategic sourcing strategies enhance its competitive position and will likely support its ongoing growth trajectory.

The post 3 No-Brainer TSX Stocks Under $50 appeared first on The Motley Fool Canada.

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Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Ces Energy Solutions. The Motley Fool has a disclosure policy.

Canadian investors have another $7,000 in Tax-Free Savings Account (TFSA) contribution room in 2025. With stock markets trading near record highs, investors are wondering where they can still find good value and get decent returns on their hard-earned savings.

TFSA 101

The government created the TFSA in 2009 to give Canadians an extra tool to invest and save for future financial projects. Since inception, the cumulative maximum contribution space in a TFSA has grown to $102,000 per person. This is large enough to build a decent retirement fund that can complement a person’s company pension, Canada Pension Plan, Old Age Security (OAS), and Registered Retirement Savings Plan (RRSP).

All dividends, interest, and capital gains earned inside a TFSA on qualifying investments are tax-free and can be fully used to reinvest or removed as tax-free income. This is helpful for anyone who is in a higher tax bracket. It is also good for retirees who want to avoid or minimize the OAS pension recovery tax.

GICs or dividend stocks?

Rates offered on Guaranteed Investment Certificates (GICs) were as high as 6% in 2023 but have come down steadily with the reductions in interest rates by the Bank of Canada. At the time of writing, most non-cashable GICs are paying 3% to 3.5%, depending on the term. That’s still better than the current rate of inflation and provides a risk-free source of income.

Dividend yields on some top TSX stocks are quite a bit higher than current GIC rates. However, owning stocks comes with the risk that the share price can drop below the purchase price, and dividends sometimes get cut if a company gets into financial trouble.

That being said, there are a number of TSX dividend stocks that have increased payouts annually for decades and should continue to raise their distributions. Enbridge (TSX:ENB), for example, has increased its dividend in each of the past 30 years.

The company is working on a $27 billion capital program to drive growth. Extra cash flow from the new assets should support additional dividend hikes. Investors who buy ENB stock at the current price can get a dividend yield of 6%.

Fortis (TSX:FTS) is another stock to consider for dividend growth. The board has increased the distribution annually for the past 51 years. Fortis has a $26 billion capital program underway that will raise the rate base from close to $39 billion in 2024 to $53 billion in 2029. Management expects the resulting boost to cash flow to support planned annual dividend increases of 4% to 6%.

At the time of writing, Fortis provides a dividend yield of 4.2%. That’s still better than a GIC, and the yield on the initial investment rises with each dividend increase.

The bottom line on TFSA investing

The best mix of GICs and dividend stocks is different for every person depending on the return they need to get, their comfort level with risk, and the required liquidity in the investments.

In the current market conditions, investors can quite easily put together a diversified portfolio of GICs and dividend stocks to get an average yield of 4%. That’s comfortably above the current rate of inflation.

The post TFSA Contribution Limit Stays at $7,000 for 2025: What to Buy? appeared first on The Motley Fool Canada.

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The Motley Fool recommends Enbridge and Fortis. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.

The Canadian government introduced the Tax-Free Savings Account (TFSA) in 2009, and some who were 18 years old and eligible to open an account then could be millionaires today. Yes, the one-of-a-kind investment account can help a user build wealth.

However, TFSA investors who achieved the feat did one thing right. They prevented the Canada Revenue Agency (CRA) from getting in the way because they followed the rules. Specific actions or activities related to the TFSA raise alarm bells. The taxman will intervene and impose penalty taxes if you fall into these CRA traps.

Stay within the contribution room

The CRA sets the TFSA contribution limit (indexed to inflation). For 2025, the limit is $7,000. Any unused contribution room in 2024 adds to the new annual limit. Assuming you have $3,000 left from last year, you can only contribute $10,000 this year.

The corresponding penalty is 1% of the excess or over-contribution multiplied by the number of months it is in your account during the calendar year. Your remedy is to withdraw the amount as soon as possible.

Don’t return withdrawn funds

TFSA withdrawals are tax-free, although if you return the money in the same year, you will be penalized for over-contribution. Remember that the amount you take out becomes an unused contribution room and is available the following year.

Forbidden action

The CRA frowns on overzealous users who use the TFSA to make quick bucks. Frequent trading of marketable securities, particularly stocks, constitutes a business. Income derived from this forbidden action or day trading becomes business income and is subject to regular taxation.

TFSA investors abiding by CRA rules should be problem-free and earn tax-free income 100% of the time. The secret of millionaire accountholders is consistent, regular contributions (max the annual limit if possible).

Dividend gems

A relatively cheap but profitable option in 2025 is PHX Energy Services (TSX:PHX). At $9.57 per share, the dividend yield is a generous 8.36%. Given the quarterly payout frequency, a $7,000 investment transforms into a recurring income of $146.30 every three months. Market analysts see a 25% average upside in 12 months ($12).

The $436.3 million company provides horizontal and directional drilling services to oil and gas industry clients. In the first three quarters of 2024, earnings declined 38% year over year to $40.5 million due to lower rig count. For 2025, management expects its fleet of “measurement while drilling” (MWD) tools to drive growth.

Another dividend gem and money-maker is Nexus Industrial (TSX:NXR.UN). The property portfolio of this $727.85 million real estate investment trust (REIT) across Canada is predominantly institutional-quality industrial properties.  Management maintains a favourable outlook in 2025 due to positive market rental fundamentals.

In the first three quarters of 2024, property revenue and net operating income increased by an identical 13.3% year over year to $131 million and $93.7 million. If you invest today, this pure-play industrial REIT trades at $7.73 per share and pays a hefty 8.28% dividend.

Costly mistakes

The CRA traps mentioned above are costly if users fall into them. Your millionaire dream could vanish by mismanaging your TFSA.    

The post Already a TFSA Millionaire? Watch Out for These CRA Traps appeared first on The Motley Fool Canada.

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• Energy Sector Strength: A Canadian Producer That Can Thrive in Any Market
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• Where to Invest Your 2025 TFSA Money for Total Returns
• 3 No-Brainer TSX Stocks Under $50

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Nexus Industrial REIT. The Motley Fool has a disclosure policy.

First Quantum Minerals (TSX:FM) is shaping up to be a standout stock for 2025, and its prospects are tightly interwoven with the optimistic outlook for copper. With a rating of “outperform” and a target price of $24, analysts believe that First Quantum is well-positioned to benefit from both macroeconomic trends and company-specific developments.

Copper, often referred to as “the metal of the future,” is expected to see heightened demand driven by the transition to renewable energy, electric vehicles, and infrastructure expansion globally. This aligns perfectly with First Quantum’s operations, making it a potentially lucrative investment.

Onto earnings

The Canadian stock’s Q4 results, while anticipated to be neutral, reflect a well-established foundation heading into 2025. Analysts note that guidance for the quarter suggests a slight reversion to the mean after a stellar Q3. However, what’s most exciting is the long-term guidance, which has been bolstered by updates from the Kansanshi Technical Report on the Zambian copper mine. This consistency in performance underpins the market’s confidence in the stock, even amidst a volatile commodities market.

One of the key catalysts for First Quantum’s strong 2025 outlook is its Cobre Panama project. Negotiations with President Mulino regarding stockpiled concentrate could kick off early in the year. Should First Quantum gain authorization to ship its 31,000 tonnes of copper concentrate, it would significantly enhance its operational cash flow. Analysts estimate that the Canadian stock is currently pricing in 55% of the value of this asset, leaving ample room for upside.

First Quantum’s other flagship project, the Kansanshi mine in Zambia, is also in the spotlight. The S3 expansion, scheduled for mid-2025, is expected to be a game-changer, boosting production capacity and reinforcing its position as a leader in the copper space. Plus, the ongoing process of selling a minority stake in its Zambian operations could unlock between $1.5 billion and $2 billion, based on market valuations.

Future outlook

Looking back at 2024, First Quantum demonstrated resilience despite challenges in the broader commodities market. While its year-over-year quarterly revenue dipped, its ability to maintain a solid operating margin of 29.2% speaks to efficient cost management. The Canadian stock has also rebounded sharply from its 52-week low. This momentum reflects growing investor confidence as copper prices remain robust.

Copper prices themselves are a critical piece of the puzzle. As the world doubles down on decarbonization, copper’s role in electrification and renewable energy infrastructure is non-negotiable. With supply constraints and rising demand, the long-term pricing outlook for copper is favourable. First Quantum, with its large-scale, low-cost operations, is uniquely positioned to capitalize on this trend.

The Canadian stock’s market cap of $16.6 billion and enterprise value of $24.7 billion underline its significant scale. While a beta of 1.73 indicates higher volatility but also potential for outsized returns in a bullish commodities market. The Canadian stock has $783 million in cash and a manageable current ratio of 1.8. Therefore, the company is financially well-equipped to navigate its ambitious expansion plans.

Bottom line

First Quantum’s strategic initiatives extend beyond just mining operations. Its ongoing efforts to optimize the value of its assets, particularly through the potential Zambian stake sale, could create opportunities, especially for shareholder returns or reinvestment in growth projects.

Plus, the broader copper market offers a promising tailwind. Analysts see copper as integral to global energy transformation, with prices expected to rise as supply struggles to keep pace with demand. First Quantum’s strong presence in this space, coupled with strategic projects like Cobre Panama and Kansanshi, ensures it remains at the forefront of this growth story. For investors, First Quantum is not just a play on copper. It’s a play on the future of global energy.

The post 1 Canadian Stock Ready to Surge In 2025 appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Canadian small cap stocks (stocks with a market capitalization of less than $1 billion) have underperformed for several years. However, that trend reversed in 2024. Last year, many small cap stocks rose by 70% or more.

Yet, 2024 was largely the catch-up trade. After the market tumbled in late 2022, small cap stocks were essentially left for dead. Nobody wanted a stock that had a market cap below $1 billion.

Small cap stocks are not as cheap as they were, but they are still attractive

As a result, you could pick up profitable, growing businesses at very attractive valuations. This was simply because they were small and unknown. Several small Canadian companies were swiped up by private equity players simply because they were just so darn cheap.

Today, the valuation gap has narrowed. Investments in small caps will largely be based on your expectations for earnings/cash flow per share growth. However, there is still a valuation gap, particularly when compared to larger stocks.

Small cap stocks still look attractive today. You might need to be a little choosey, but there are still some great opportunities. Here are a few to look at in 2025.

This stock is set for a turnaround

Sangoma Technologies (TSX:STC) has been a turnaround story for the past few years. It is now at an inflection point.

Sangoma provides communication software for small and medium (SMB) sized businesses. It has applications that span a broad array of customer needs. Customers get an enterprise experience at an SMB price.

After new management rightsized its organizational structure and focused its sales strategy, the company has started to generate a tonne of excess cash. It has been using that to quickly pay down what was once an oversized debt burden.

Now, Sangoma is positioned to focus on growth and profitability again. The company is expecting sales momentum to increase in the second half of 2025. Despite rising 150% in 2024, this small cap stock is still relatively cheap with a price-to-free cash flow ratio of only 6.5.

A small cap tech stock on the rise

VitalHub (TSX:VHI) is a bit of a different scenario than Sangoma. This tech stock is pretty pricey after a 177% rise in 2024. Early in 2024, its stock was very cheap. However, the market was pleasantly surprised when it started generating higher than expected earnings and free cash flow.

VitalHub provides software for the healthcare industry. Across the world, health systems are stressed, over utilized, and inefficient. VitalHub’s software helps solve a lot of efficiency problems in the system. It also helps improve overall patient outcomes.

Many health systems are stuck with antiquated software (or paper in some instances). As a result, the industry is ripe for the type of disruption VitalHub provides.

Today, VitalHub is loaded with cash after some recent equity financings. It has been deploying this into a large pipeline of acquisitions. If it can continue to accretively deploy capital, it could be another year of strong earnings and free cash flow growth.

The Foolish takeaway

These are just a few stock ideas you can find in the Canadian small cap universe. Look for companies that are either cheap when compared to other industry peers or have a catalyst to cause profitability to rapidly rise (or preferably both).

If you are shrewd, you might be able to pick these stocks up before they become household names in Canada or across the world. You can rapidly see your capital rise when you hit the right small cap stock opportunities.

The post What to Know About Canadian Small-Cap Stocks for 2025 appeared first on The Motley Fool Canada.

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Fool contributor Robin Brown has positions in Sangoma Technologies and Vitalhub. The Motley Fool has positions in and recommends Vitalhub. The Motley Fool has a disclosure policy.

Technology stocks outperformed in 2024 and helped the Toronto Stock Exchange achieve an 18% yearly gain. Celestica (TSX:CLS), the sector’s top performer, benefitted from the artificial intelligence (AI) wave and backed up the stock’s meteoric rise with strong financial performance.

Fortunately, the high-flying AI stock isn’t the only option for Canadians investing in the high-growth sector. Tecsys (TSX:TCS) and Sangoma Technologies (TSX:STC) are cheaper and the uptrend could continue in the new year. Their trailing one-year price returns are 40.1%-plus and 150.6%-plus, respectively.

Winning run

Many missed out on Celestica’s winning run, although the growth prospects remain tremendous due to the AI boom. As of this writing, the share price is $148.11, 296.8%-plus higher than a year ago. The $17.2 billion company provides supply chain solutions and electronics manufacturing services (EMS), including in hyperscaler markets.

Celestica is Canada’s counterpart to chipmaker NVIDIA across the border. In the nine months ending September 30, 2024, net earnings increased 82.7% year-over-year to US$293 million. Its President and CEO, Rob Mionis, said, “Looking to next year, we continue to see solid demand signals from many of our large customers, which are providing us with visibility for continued growth.”

The new strategic relationship with Groq, an AI company that developed the Language Processing Unit (LPU), is a growth catalyst. Celestica will support Groq in manufacturing AI and machine learning servers beginning this year.

Scaling the business

Montreal-based Tecsys provides advanced supply-chain solutions, focusing on the healthcare and auto parts industries. The revenue of this $641.8 million company has risen consistently every year in the last three fiscal years.

Its President and CEO, Peter Brereton, said, “Fiscal 2024 has been a landmark year for Tecsys in which we have demonstrated our ability to drive continued growth and expand market opportunity.”

In the first half of fiscal 2025 (six months ending October 31, 2024), Software-as-a-Service (SaaS) revenue and net profit rose 33% and 39% year-over-year respectively to $31.4 million and $1.55 million. According to its CFO, Mark Bentler, the results reflect steady progress across key metrics and Tecsys continues to scale the business.

“We head into fiscal 2025 with confidence that we are delivering exceptional value to our customers and are well-positioned to capitalize on our market momentum,” Brereton added. If you invest today, Tecsys trades at $43.50 per share and pays a 0.72% dividend.

Driving innovation

Due to its positive growth trajectory, Sangoma is now on investors’ radar. The $342 million communication technology company has a global communications platform for small and mid-market businesses. It delivers cloud-based Communications-as-a-Service (CaaS) solutions. As of January 9, 2024, this fast-rising tech stock trades at $10.20 per share.  

In Q1 fiscal 2025 (three months ending September 30, 2024), net loss thinned 21.9% to US$1.9 million compared to Q1 fiscal 2024, while operating cash flow increased 55% year-over-year to US$12 million. Charles Salameh, CEO of Sangoma, notes the growing pipeline and deal sizes. He added that business profitability remains strong due to the robust growth in operating cash flow.  

Pick any one stock

Celestica stands out in Canada’s tech sector, but the price is expensive now. Tecsys and Sangoma Technologies are the next-best alternatives for price-conscious investors.

The post Best Tech Stocks for Canadian Investors in the New Year appeared first on The Motley Fool Canada.

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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tecsys. The Motley Fool recommends Nvidia. The Motley Fool has a disclosure policy.