Inflation Just Cooled Down to 1.8%, and These Stocks Are Positioned to Benefit

Canada’s headline inflation rate just cooled to 1.8% in February — its lowest level in some time — and while one data point does not make a trend, it does raise a practical question for Canadian investors: which stocks stand to benefit most if this keeps up?

Lower inflation can improve investor confidence, ease borrowing costs, and take pressure off household budgets, which often lifts valuations for companies that rely on financing, consumer spending, or long-duration growth plans. The trick is to focus on businesses that would benefit even if inflation cools in a “slow and bumpy” way, not just a perfect straight-line drop.

EXE

Extendicare (TSX:EXE) sits in a sweet spot for softer inflation as it operates in long-term care and home health, where demand comes from demographics more than the economic cycle. Over the last year, it leaned into growth in home health and better profitability in its operating segments, while continuing to integrate and optimize assets after acquisitions. When inflation cools, wage pressure and cost escalation can become less intense, which matters a lot in care-heavy businesses where labour drives a big share of expenses.

In Q3 2025, it reported net earnings of $24.1 million, or $0.285 per share, and it posted adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $50.8 million, up strongly year over year. Meanwhile, revenue rose to about $440.3 million. Adjusted funds from operations (FFO) rose to $29.5 million, or $0.349 per share, and management highlighted that cash flow growth pushed the payout ratio lower on a trailing basis. Today, it trades at 22.8 times earnings at writing, with a 2% yield, so the market still treats it more like a steady compounder than a high-yield play.

For investors who want inflation-cooling exposure tied to demographics rather than the economic cycle, Extendicare’s labour-heavy cost structure means a sustained drop in wage pressure could show up directly in margins — and the improving payout ratio suggests the cash flow story is already moving in the right direction.

GSY

Goeasy (TSX:GSY) looks like another name that can benefit if inflation cools as consumer credit tends to look healthier when budgets stop getting squeezed every month. Over the last year, investors have watched it balance growth with risk controls, especially as higher rates made delinquency fears more visible. If inflation keeps easing, it can help borrowers manage payments and can also improve overall sentiment toward lenders, which often shows up as multiple expansion after tough stretches.

In Q3 2025, goeasy reported revenue of $440.2 million and adjusted earnings per share (EPS) of $4.12, while the consumer loan portfolio grew to $5.44 billion, up 24% year over year. Those are strong growth numbers, even if the Canadian stock still gets judged on credit quality and loss rates in any given quarter. The valuation looks surprisingly modest for that growth, with the shares sitting around 8.1 times trailing earnings, and it offers a forward dividend yield around 5.3%.

Goeasy is the most direct inflation-cooling play of the stocks outlined here. When household budgets stop getting squeezed, its borrowers manage their monthly payments better, delinquency fears ease, and a stock trading at 8x earnings with 24% loan portfolio growth can re-rate quickly.

BYD

Boyd Group Services (TSX:BYD) can also get a lift from softer inflation since collision repair depends heavily on labour and parts costs, and both can become easier to manage when price pressure cools. It runs auto body repair centres across North America, and it benefits from steady demand tied to miles driven and accident frequency rather than discretionary shopping. Over the last year, the story has centred on cost initiatives and operational improvements, with management pointing to traction that began building in the back half of 2025.

In Q3 2025, Boyd reported sales of $790.2 million, up 5%, while adjusted EBITDA jumped 22.8% to $98.4 million and the adjusted EBITDA margin improved to 12.4%. Adjusted EPS came in at $0.62, and same-store sales increased 2.4%, which suggests it gained ground even while broader repairable claims volumes softened. The market still values it like a long-duration operator, with a very high 233 times earnings, so execution needs to stay crisp to justify the price.

The jump in EBITDA and the margin improvement show that Boyd’s cost initiatives are working, and softer inflation on labour and parts could accelerate that progress. The 233x trailing P/E demands continued execution, but the direction of travel is the right one.

Bottom line

These three stocks offer different ways to benefit from cooling inflation without betting everything on one outcome: Extendicare on labour cost relief, goeasy on consumer credit recovery, and Boyd on operational leverage in collision repair.

The key is to treat softer inflation as a tailwind, not the whole thesis, and to own businesses that can still execute if the trend cools more slowly than the market hopes. For more businesses that could keep executing in all kinds of macro environments, check out the recommendations inside Stock Advisor Canada.

The post Inflation Just Cooled Down to 1.8%, and These Stocks Are Positioned to Benefit 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.