High Growth, Lower Risk: Mid-Cap Stocks Canadians Should Consider Buying

Mid-cap stocks typically have market capitalizations between $2 billion and $10 billion. These companies often provide higher growth potential than large-cap stocks while exhibiting lower volatility than small-cap stocks. As a result, mid-cap stocks offer investors the best of both worlds, making them particularly attractive investment opportunities. Against this backdrop, let’s take a closer look at two top mid-cap stocks that present compelling buying opportunities right now.

Lightspeed Commerce

Lightspeed Commerce (TSX:LSPD) provides omnichannel commerce and payments platforms to businesses—particularly in the retail and hospitality sectors—across more than 100 countries. The accelerating adoption of omnichannel selling has significantly expanded the company’s addressable market. Benefiting from these favourable industry trends, the Montreal-based firm delivered a strong second-quarter performance last month, with revenue and adjusted earnings per share (EPS) growing by 15.1% and 23.1%, respectively.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged 52.1% year over year to $21.3 million, while the company generated $18 million in free cash flow during the quarter. Lightspeed also exited the period with a robust liquidity position, holding $462.5 million in cash and cash equivalents, which provides ample flexibility to fund ongoing growth initiatives.

Looking ahead, Lightspeed is focused on launching innovative products, rolling out artificial intelligence (AI)-powered tools, and expanding its payments solutions geographically—all of which could support continued financial growth in the coming quarters. In addition, ongoing cost-optimization efforts, including the use of AI to streamline support and service operations, should further enhance operating efficiency and profitability.

Despite these attractive growth prospects, the stock trades at reasonable next-12-month valuation multiples, with a price-to-sales ratio of 1.3 and a price-to-earnings multiple of 20.2. Considering these factors, I believe Lightspeed represents an excellent mid-cap stock to buy at current levels.

Algonquin Power & Utilities

Second on my list is Algonquin Power & Utilities (TSX:AQN), a regulated utility company that provides electricity, water, and natural gas services to approximately 1.2 million customers across the United States and Canada. In its most recent third-quarter results, the company reported net income of $38.9 million. Excluding special and one-time items, adjusted net income rose to $71.7 million, while adjusted EPS came in at $0.09, representing a 12.5% year-over-year increase. New rate approvals, favourable weather conditions, and lower operating, depreciation, and interest expenses drove this improvement.

Algonquin continues to expand its regulated rate base, supported by planned capital investments of $2.5 billion in regulated assets over the three years through 2027. Amid these investments, the company’s management expects its rate base to grow from $7.9 billion to $9.1 billion by the end of 2027. In parallel, the company is focusing on optimizing its cost structure following its exit from the renewables segment. It is actively identifying additional cost-saving initiatives to enhance efficiency and profitability. As a result, management expects operating and maintenance expenses as a percentage of total revenue to decline from 38% in 2024 to 31%-33% by 2027.

Looking ahead, Algonquin forecasts adjusted EPS to grow at a compound annual rate of 15.3% to reach $0.46 by 2027. Supported by these stronger earnings prospects, management expects the payout ratio to decline meaningfully from 117% in 2024 to 59% by 2027. Given its improving financial profile and solid growth outlook, I believe Algonquin is well-positioned to continue rewarding shareholders. The company currently pays a quarterly dividend of $0.065 per share, yielding 4.17%.

The post High Growth, Lower Risk: Mid-Cap Stocks Canadians Should Consider Buying appeared first on The Motley Fool Canada.

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Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Lightspeed Commerce. The Motley Fool has a disclosure policy.