Hi there, Fools. I’m back again to highlight three intriguing growth companies. As a reminder, I do this because businesses with rapidly expanding sales and earnings
- have greater “multi-bagger” appreciation potential than the average company; and
- can often defend against an overall downturn thanks to truly unique products or services.
While growth stocks are typically more volatile than the overall market, they can provide plenty of upside for enterprising long-term investors.
So, without further ado, let’s get to this week’s high-growth opportunities.
Leading off our list is Spin Master (TSX:TOY), which has grown its top and bottom line by 83% and 274%, respectively, over the past three years. In recent months, shares of the toy maker have fallen by about 12%, making it an opportune time to get in on the action.
Bay Street is worried that recent insider selling could be a sign of bearish things to come, but I wouldn’t be overly concerned. In Q2, Spin Master’s earnings grew 22% as revenue increased 13% to $276.7 million. Moreover, the company generated $19.5 million in free cash flow during the quarter.
Positive free cash flow is generally a rare feat for high-growth plays, so it’s especially encouraging to see.
All signs point to the fact that Spin Master’s brands and entertainment franchises — including Hatchimals, PAW Patrol, and Gund — remain in high demand.
Easy does it
Next up we have goeasy (TSX:GSY), whose revenue and net income have more than doubled over the past five years. Year to date, shares of the alternative lender are up a solid 22% versus a loss of 5% for the S&P/TSX Composite Index.
To be sure, concerns are growing over potential regulatory changes to goeasy’s operating environment. But if you’re willing to accept some near-term uncertainty, the stock provides an attractively priced opportunity.
In Q2, goeasy’s earnings jumped 33% as revenue grew 26% to $123.3 million. Moreover, the operating margin expanded 260 basis points while same-store sales increased 6.9% — its 33rd consecutive quarter of same-store sales growth. That suggests that goeasy’s competitive position is only strengthening.
When you combine that positive operating momentum with a cheapish forward P/E of 10 and solid dividend yield of 2%, the regulatory risks might be worth taking on.
My final growth idea this week is Savaria (TSX:SIS), which has grown its top and bottom line by 140% and 160%, respectively, over the past three years. During the same time period, shares of the personal mobility products company are up a whopping 260% versus just 46% for the S&P/TSX Capped Industrials Index.
Savaria’s recent strategic acquisitions are paying off handsomely. In the last quarter, earnings more than doubled to $6.4 million on revenue growth of 61%. Furthermore, net margins expanded 300 basis points to 9.9%, suggesting that management continues to squeeze significant cost synergies from its new segments.
After its strong price performance in recent years, Savaria isn’t dirt cheap. But with a forward P/E in the low 20s and beta of 0.8 — still less volatility than the overall market — Savaria’s risk/reward trade-off remains attractive.