You have a variety of investment choices to park your funds, depending on your risk appetite. If you are nearing retirement, you’ll want to look at low-risk investments such as bonds. Alternatively, if you are just starting out, investing in high-growth companies that might explode will help you generate massive wealth over the long term.
You need to identify companies with expanding addressable markets and that have the ability to expand revenue and earnings over time. Investing in growth stocks is a risky proposition, but they also have the potential to generate exponential returns.
Here are three game-changing stocks on the TSX that you can buy right now if you have $3,000.
A ride-hailing company
The first company on the list is ride-hailing platform Facedrive (TSXV:FD), a company valued at a market cap of $1.17 billion. Similar to other growth companies, Facedrive has also been extremely volatile since its IPO. Shares rose from $2.05 in September 2019 to touch a record high of $28 in July 2020.
The stock is currently trading at $12.66 and is up 500% in just over a year, despite losing 60% in the last three months. In the first quarter of 2020, the company reported sales of $388,000, up 1,000% year over year. Facedrive is eyeing international expansion and has entered the food-delivery segment as well.
Facedrive is a high-risk, high-return stock. The company will have to raise capital multiple times, as it is part of a highly unprofitable industry that requires massive scale to break even. Peer companies Uber and Lyft continue to post an operating loss but command multi-billion-dollar valuations.
A recent IPO
One of Canada’s recent IPOs is Nuvei (TSX:NVEI), a stock that has almost doubled in the last month. Nuvei was the largest tech IPO on the TSX, as the company sold 30.9 million shares for gross proceeds of US$805 million. It also raised US$28.4 million via a direct placement, which means total proceeds were US$833 million.
Nuvei is in the payment technology space and its platform supports 50,000 businesses all around the world. The company has so far processed $35 billion worth of transactions on its network and is part of a rapidly expanding market.
In fiscal 2019, Nuvei sales rose 65% year over year to $245.8 million, while its operating profit surged 263% to $11.28 million. In the June quarter, Nuvei sales were up 63.6% at $82.6 million, while operating profits stood at $15.74 million, indicating a healthy margin of 19%.
We can see that Nuvei has high operating leverage, and a small rise in revenue will help it increase profit margins at a faster pace.
Dye & Durham is up 50% since IPO
Shares of Dye & Durham (TSX:DND) are trading 50% higher than the IPO price. DND is also a recently listed company that went public in July 2020. Dye & Durham is a legal technology company that provides legal and business professionals a platform to access public records and support business transactions and regulatory compliance processes.
DND’s customer base includes blue-chip law firms, governments, and financial corporations. The company claims its robust platform automates the due diligence searches, document creation, and electronic record filings for commercial and real estate transactions.
DND continues to add services to its platform and has targeted acquisitions to drive top-line growth. It has increased sales at an annual rate of 71% between fiscal 2016 and 2019. While its sales rose from $8.8 million to $43.8 million in this period, adjusted EBITDA rose from $2 million to $26.4 million.
DND has over 25,000 active clients on its platform, and not a single customer accounts for more than 2% of total sales.
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.
The Motley Fool recommends Uber Technologies. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.