1 TSX Stock I’d Buy Before Higher Inflation Hits Harder

Inflation can sneak up fast. One month, prices look annoying. The next, investors start wondering which companies can raise prices, protect margins, and still sell products customers actually need.

The important part is that Canadians are finally talking about it. A recent Capital One Canada survey found that 50% of Canadians agree that keeping finances private has done more harm than good. Furthermore, 61% found that when they talked more openly about finances, they reported more concrete returns.

So, now that you’ve taken that step towards being more open about your finances, where should you turn?

HPS

Hammond Power Solutions (TSX:HPS.A) looks interesting right now. Hammond stock makes dry-type transformers, power quality products, and related electrical equipment. It sells the boring-but-critical gear that helps power factories, data centres, mines, renewable projects, commercial buildings, and grid upgrades. In an inflationary market, that kind of demand can matter a lot. Customers may delay a nice-to-have purchase. They can’t delay reliable power forever.

Costs can flare up again on a global scale, and Canadians need to prepare. When they do, companies with pricing power, strong order books, and exposure to infrastructure spending can look far more appealing than businesses that need shoppers to keep opening their wallets.

Into earnings

Hammond stock’s latest quarter showed exactly why this stock deserves attention. In the first quarter of 2026, revenue climbed 31.5% year over year to a record $265 million. That growth came from stronger shipments in the United States and Mexico, custom power transformers, data centre activity, and pricing increases. Its backlog also sat 94.6% higher than last year, which gives the company better visibility than many smaller industrial names. Better still, shipments from its new Mexico plant started on schedule, adding capacity when customers already need more supply.

That backlog is the real draw here. Inflation can squeeze companies when they need to chase new business at the wrong price. Hammond stock already has strong demand in front of it. Data centres need massive amounts of electrical infrastructure. Manufacturers continue to automate. Utilities and private buyers still need to update aging systems. Even if the economy slows, the long-term need for more electricity doesn’t disappear.

Hammond stock also benefits from a practical inflation hedge inside its own business model. It sells essential equipment into projects where reliability often matters more than bargain pricing. If copper, steel, labour, or tariff costs rise, the company has shown it can use price increases to help offset pressure. That doesn’t make it immune, but it does make it more resilient than a company selling discretionary products into a nervous consumer market.

Considerations

The risk comes from valuation and margins. Hammond isn’t a hidden bargain anymore, trading at a trailing price-to-earnings (P/E) ratio around 59 and a forward P/E ratio around 35. That means investors already expect plenty of growth. If orders slow, data centre spending cools, or margin pressure lingers, the stock could pull back sharply.

And margins do deserve attention. Gross margin improved from 29.2% in the fourth quarter of 2025 to 30.1% in the first quarter of 2026, but it still slipped from 31.5% a year earlier. Net earnings also fell to $19.6 million from $26.2 million last year, even with higher sales. That shows inflation can cut both ways. Hammond stock can pass along some costs, but it can’t control every input price or every tariff effect.

Still, I’d rather own a company fighting margin pressure while demand rises than one trying to protect profits as customers walk away. Hammond sits in the right part of the market for this moment. It supports electrification, data centres, infrastructure, and industrial growth. Those themes don’t rely on one hot product cycle.

Bottom line

For investors worried that inflation could hit harder, Hammond Power Solutions offers a smart mix of growth and necessity. Hammond stock carries risk after a big run. Yet the business looks built for a world where power demand keeps rising, and costs stay stubborn. That makes it one TSX stock I’d buy before inflation steals more market confidence, especially for investors who can handle volatility and think in years, not weeks.

The post 1 TSX Stock I’d Buy Before Higher Inflation Hits Harder 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 positions in and recommends Hammond Power Solutions. The Motley Fool has a disclosure policy.