3 Canadian Tech Stocks With the Best Cash Flow, Earnings Momentum

The Canadian tech stocks on our list, excluding Shopify, have top cash flow and earnings growth momentum

SmallCapPower | August 25, 2020: Earnings and cash-flow growth are usually important factors in driving stock-price performance. Today we have identified three Canadian tech stocks (excluding Shopify) with the best cash-flow growth and earnings momentum. These companies also have a debt-to-equity ratio less than 1.

*Returns are based on closing stock prices as of August 24, 2020

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Kinaxis Inc. (TSX:KXS) – $199.57
Kinaxis is a vendor of SaaS solutions for supply-chain planning. Its software provides customers with a control tower view of their supply chains, highlighting issues that may affect their ability to meet customer demand. It also allows customers to perform scenario analysis, allowing them to determine the impact that different decisions might have on their operations. Kinaxis recently reported second-quarter revenue rose 45% year over year to US$61.4 million. KXS has a five-year cash flow growth rate of 13.5% as well as a five-year earnings per share growth rate of 19.9%.

  • Five-Year Return: 441%

Enghouse Systems Limited (TSX:ENGH) – $73.70
Enghouse Systems provides enterprise software solutions and has grown through a ‘roll-up’ strategy, typically spending between $20 million to $40 million a year on acquisitions of good-quality software assets at bargain prices, which are used in contact centres, telecommunication networks, transportation systems and for video conferencing. On June 4, 2020, Enghouse reported better-than-expected Q2 2020 revenue of $140.9 million, up 58% year over year, while net earnings per share of $0.49 also surpassed expectations, surging 64% from a year earlier. Driving second-quarter results was its video conferencing division, Vidyo Inc, which enables healthcare organizations, mostly in the United States, to hold video appointments with patients over the Internet, as well as allowing banks to meet virtually with customers. ENGH stock has a current dividend yield of 0.7% and the Company has increased its dividend for 12 straight years. Enghouse Systems has a five-year cash flow growth rate of 13.7% as well as a five-year earnings per share growth rate of 19.0%.

  • Five-Year Return: 214%

Ballard Power Systems Inc. (TSX:BLDP) – $21.83
Ballard Power Systems’ zero-emission PEM fuel cells are enabling electrification of mobility, including buses, commercial trucks, trains, marine vessels, passenger cars, forklift trucks and UAVs. During Q2 2020, Ballard reported revenue that rose 9% to US$25.8 million, a gross margin of 21%, and ended the quarter with $170.3 million in cash. BLDP has a five-year cash flow growth rate of 12.7% as well as a five-year earnings per share growth rate of 5.2%.

  • Five-Year Return: 1199%

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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