2 Stocks That Have Been Soaring in the Past 3 Months

Constellation Software Inc. (TSX:CSU) has achieved strong growth this year, and there could still be more to come.

| More on:
The Motley Fool

Investing in growth stocks is a great way to build your portfolio over the long term. While dividends are nice, a company is more likely to grow its business if it reinvests in itself and doesn’t have to worry about maintaining or growing a dividend. That’s why it’s not a coincidence that many of the top tech companies around the world don’t offer payouts to their shareholders. After all, a rising stock price could more than make up for a lack of a dividend.

The two stocks below have excellent opportunities for growth in the years to come and, in just the past three months, have generated significant returns for investors.

Constellation Software Inc. (TSX:CSU) saw its stock gain a lot of momentum after it released its quarterly results back in April. The company showed strong sales growth of 29% from a year ago, and its bottom line more than doubled. As a result, its share price has been on the rise recently and has increased 20% over the last three months, and year-to-date returns are even higher at 35%.

The stock recently reached $1,000 and is one of the pricier stocks that you can find on the TSX. Although it has high per-share earnings in the double digits, its stock trades at more than 80 times its profits and 26 times its book value, requiring new investors to pay a big premium to own a piece of the company.

A lot of Constellation’s growth has come via acquisition, and over the trailing 12 months the company has accumulated nearly $600 million in free cash flow, which will help to facilitate future growth. Over the past four years, Constellation’s sales have more than doubled, and so too have its earnings.

The company has averaged a solid 8.6% profit margin over the past five years, as managing all its acquisitions and the moving parts involved has not slowed Constellation’s profit growth, which is a great sign for investors. The stock is proving to be a great buy this year, and it’s not showing any signs of slowing down.

Great Canadian Gaming Corp. (TSX:GC) is a gambling stock that you don’t have to take a big risk on. Although the company is known for its casinos, it also generates revenues from racetracks and even operates hotels and theatres as well. The stock got a big boost last year when, in partnership with another company, it won a bid to operate three key casinos in the Toronto area, which will only help to accelerate the company’s strong growth.

The share price took off again in May, as the company’s first-quarter results showed a strong 62% rise in sales, while profits were also up by a similar amount. The strong showing sent the stock to up over $50 and it has grown nearly 60% in just the past three months.

While the stock isn’t as expensive as Constellation’s, at a price-to-earnings ratio of 35 and more than six times book value, investors are still paying a premium to own Great Canadian. However, given its strong growth prospects, it could be well worth it.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned.

More on Investing

Oil pumps against sunset
Investing

Oil or Tech? Why Choose When You Can Get Both in a Single Stock?

Tech stock Pason Systems (TSX:PSI) is exposed to the energy market boom.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Investing

Protect Against Inflation With 2 Top TSX Stocks

Here are two top TSX stocks that long-term investors concerned about inflation may want to consider in this time of…

Read more »

Woman has an idea
Tech Stocks

The Smartest Stocks to Buy With $20 Right Now and Hold Forever

These under-$20 stocks have the potential to grow further with time and deliver solid capital gains.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

TFSA Investors: Put $45,000 in These Top TSX Stocks and Watch Your Passive Income Roll In

Are you looking to retire early? Here are a few ideas about how your TFSA could earn a passive-income stream…

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Love Passive Income? Here’s How to Make Plenty of it as a Real Estate Investor

You could definitely create passive income by investing in pure real estate, but you could make just as much, if…

Read more »

Make a choice, path to success, sign
Dividend Stocks

2 High-Yielding Dividend Stocks You Can Buy and Hold for Years

These two high-yielding dividend stocks can be the perfect addition to your portfolio, as the bear market causes payout yields…

Read more »

A worker uses a laptop inside a restaurant.
Tech Stocks

Why Investors Shouldn’t Give Up on Shopify Just Yet

Here's why long-term investors may not want to throw in the towel just yet on e-commerce juggernaut Shopify (TSX:SHOP).

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

TFSA Wealth: How to Turn $88,000 Into $1 Million for Retirement

Canadians can use the TFSA to hold a basket of diversified equity investments, allowing you to turn a $88,000 investment…

Read more »