After losing substantial value in 2022, TSX tech stocks marked a recovery in 2023. While the uncertain economic trajectory and pressure on consumer and enterprise spending continue to pose challenges, tech stocks are poised to benefit from the ongoing digital shift. Meanwhile, easing inflation and economic improvement could give a massive boost to the shares in the technology sector. 

Against this backdrop, I’ll discuss two high-growth Canadian stocks from the tech sector that should be on your radar to generate solid capital gains. 

WELL Health 

Shares of the digital healthcare company WELL Health (TSX:WELL) witnessed sharp selling in 2022, as investors feared that the easing of COVID-led lockdowns and macro challenges would likely weigh on demand. However, that didn’t happen, as the company remained immune to the macro and geopolitical headwinds while it continued to deliver stellar growth led by higher omnichannel patient visits. 

Thanks to its solid growth, WELL Health stock is up about 62% year to date. Notably, the WELL Health stock witnessed a pullback in recent days, providing a solid buying opportunity for long-term investors. 

WELL Health continues to grow its revenues at a solid double-digit rate, led by strength in organic sales. In the first quarter (Q1) of 2023, WELL Health’s top line increased by 34%, reflecting a 21% growth in organic sales. Thanks to the momentum in its business, WELL Health raised its full-year, top-line outlook. It expects to deliver sales in the range of $690-$710 million in 2023, indicating a year-over-year growth of 21-25%. 

WELL Health’s strong organic growth, robust cash flows, continued increase in omnichannel patient visits, and momentum in the high-margin virtual services revenue positions it well to deliver sustainable, profitable growth in the coming years. Moreover, its focus on accretive acquisitions and investments in AI (artificial intelligence) technologies will expand its addressable market and help develop compelling new products to win more customers. 

While WELL Health is growing rapidly, its stock is trading cheap. WELL Health’s forward enterprise value-to-sales multiple of 2.1 is significantly below its historical average and makes it too cheap to ignore near the current levels.

Payfare

Payfare (TSX:PAY) is a financial technology company offering digital banking, payments, and loyalty-rewards solutions to the modern-day gig economy workforce. Like its tech peers, shares of this Payfare marked a recovery in 2023 and gained about 44% year to date. 

Payfare continues to deliver stellar financial performance despite economic weakness, reflecting the strength of its business model. Its revenues are growing rapidly (it marked 76% growth in the first quarter of 2023), reflecting a 62% jump in its active user base. Furthermore, Payfare consistently generated positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and turned profitable in the first quarter. 

Payfare expects its top line and EBITDA to increase by approximately 46% and 415% year over year in 2023. Its partnerships with leading food delivery and ride-sharing platforms, focus on winning new customers, and international expansion with existing partners bodes well for future growth. Moreover, its solid recurring revenue streams and low customer acquisition costs provide a solid base for growth. Furthermore, its focus on new product launches, asset-light business model, and increased penetration will likely support its stock price. 

The post High-Growth TSX Stocks to Watch in the Technology Sector 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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.