3 Innovative TSX Companies Leading the Way in New Markets

Written by Christopher Liew, CFA at The Motley Fool Canada

Among today's cutthroat competition, modern businesses need to adapt to the rapidly changing marketplace, spot trends, and, more importantly, innovate. A successful innovation, whether by introducing novelty in products and services, strategy, or business models, increases market share and leads to economic growth.

Three innovative TSX companies have positive returns thus far in 2023 and are potential multi-baggers. Hammond Power Solutions (TSX:HPS.A), Profound Medical Corp. (TSX:PRN), and H2O Innovation Inc. (TSX:HEO) are enticing prospects leading the way in new markets.

Hammond is gradually gaining a dominant share in utility markets. This $505.4 million company manufactures transformers (dry-type and oil-filled transformers), power quality products, and related magnetics used by clients in various industries like mining, oil and gas, solar, steel, waste and water treatment.

The Guelph-based firm has been in the transformer industry for over a century but continues to innovate and meet customers’ demanding applications.

The high-flying industrial stock is outperforming the broader market year to date, +112.12% versus +5.33%. At $42.48 per share, investors also partake in the 1.18% dividend. According to management, Hammond will continuously improve its profitability and drive shareholder return through earnings and dividends.

In 2022, sales and net earnings jumped 46.9% and 195% year over year to $558.5 million and $44.8 million, respectively. For Q1 2023, the top and bottom lines climbed 33.9% and 83.5% to $171 million and $15.7 million, respectively, compared to Q1 2022. Its CEO, Bill Hammond, said, "Following a robust 2022, we are starting 2023 off on the right foot with continued growth."

TSX's healthcare sector has a superstar in the making in Profound Medical for its innovative approach to treating diseases. The $386 million medical technology company develops customizable, incision-free therapeutic systems, the only one that merges three modalities. At $18.28 per share, the stock is up 26.24% year to date.

Management is happy with the resoundingly positive feedback on TULSA-PRO. The technology combines real-time MRI with the safety and ablation power of directional and focused ultrasound technology for the incision-free ablation of diseased tissue.

In Asia, Profound is commercializing Sonalleve, an innovative therapeutic platform for treating uterine fibroids and palliative pain treatment of bone metastases. Expect both technologies to help the company achieve profitability sooner rather than later.

H2O Innovation provides best-in-class technologies and services in the global water treatment industry. The $249.3 million company has built its success on three interconnected pillars: water technologies and services, specialty products, and operation and maintenance.

Its President and CEO, Frédéric Dugré, said Q3 fiscal 2023 marks four consecutive quarters of more than 17% organic revenue growth. In the three months that ended March 31, 2023, total revenue jumped 31.7% year over year to $68.4 million. At only $2.70 per share, HEO is up 6.23% year to date, although the upward trajectory should continue.

Dugre adds the company is growing from repeatable and increasing business with existing and new customers. Management intends to continue improving its cash flow conversion cycle and remain selective on growth capital expenditures.

It won't be long before Hammond Power, Profound Medical, and H2O Innovation become sought-after Canadian growth stocks. Their innovations should ensure sustained business growth and deliver prosperity to investors.

The post 3 Innovative TSX Companies Leading the Way in New Markets appeared first on The Motley Fool Canada.

Before you consider H2o Innovation, you'll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in April 2023... and H2o Innovation wasn't on the list.

The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 21 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks * Returns as of 4/18/23

More reading

The 10 Stocks Every Canadian Should Own in 2023

Top TSX Energy Stocks for Total Returns

More Canadian Stock Market News

Brookfield Asset Management Spin-Off: What Investors Need to Know

Passive Income: 4 Safe Dividend Stocks to Own for the Next 10 Years

Two New Stock Picks Every Month!

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

2023