Since the beginning of September, the S&P/TSX Composite Index has fallen by over 2.5%. The rising COVID-19 cases across the globe and the high unemployment rate have contributed to the decline. With the United States presidential election scheduled for next month, I expect the volatility to continue. Even during these uncertainties, investors with a longer time frame can make small but regular investments to build wealth over the long term.
However, choosing the right companies with large and growing addressable markets is vital. Here are the three companies which offer excellent buying opportunities for long-term investors.
Real Matters
My first pick would be Real Matters (TSX:REAL), which services the mortgage lending and insurance industry through its proprietary platforms and network capabilities. The lower interest-rate-environment has created a long-term tailwind for the company. Currently, the company services 60 of the top 100 mortgage lenders in the United States. The company has a high retention rate of 95%, indicating a greater satisfaction level among its clients.
The company’s management estimates its addressable market to be at US$13 billion. For fiscal 2020, analysts project the company’s top-line to be at US$425.7 million. So, the company has a significant opportunity to expand its business.
Meanwhile, the mortgage lenders are facing scalability and performance issues from their existing vendors amid the surge in refinancing activities. By leveraging its technology and healthy partnerships with field professionals, Real Matters is well equipped to expand its market share.
Despite strong growth prospects, the company trades at an attractive forward price-to-earnings multiple of 28.5, proving an excellent buying opportunity.
Canopy Growth
My second pick would be a cannabis company, Canopy Growth (TSX:WEED)(NYSE:CGC), which has lost over 30% of its value this year. The cannabis sector is going through a challenging period amid the slew of structural issues, such as lower-than-expected demand, robust black market, pricing pressure, and slow rollout of retail stores.
However, the outlook for the cannabis sector looks brighter. Last month, BDSA published a report, which projects the global cannabis sales to rise 38% this year to reach US$19.7 billion despite the impact of the pandemic. The market research firm also expects the global cannabis sales to reach US$47.2 billion by 2025, which represents a CAGR of 22%.
Meanwhile, Canopy Growth is well positioned to capture a significant share in the growing cannabis market. The company has re positioned its value products with higher and more consistent THC ranges and is also expanding its Cannabis 2.0 offerings to drive sales.
In the United States, the company has launched a line of hemp-derived wellness supplements in association with Martha Stewart. It is also planning to launch THC-infused beverages in the summer of 2021. So, given its impressive growth prospects and healthy liquidity position, I am bullish on Canopy Growth.
Dye & Durham
Dye & Durham (TSX:DND), which provides due diligence and corporate services in Canada and the United Kingdom, is my third pick. The company has over 25,000 clients with a low churn rate of just 2%. The average tenure of its top 100 clients stands at 16.6 years. Further, its net revenue retention rate is 109%. So, the company has a robust and loyal customer base.
Along with organic growth, the company focuses on acquisition to drive its business. Since 2013, the company has made 14 acquisitions. Generally, acquisitions come at a hefty premium. However, Dye & Durham’s acquisitions are accretive, driving its adjusted EBITDA. Since 2016, its top-line has grown at a CAGR of 65%, while its adjusted EBITDA increased by 107%.
Meanwhile, the company is working on completing the acquisition of Property Information Exchange, a cloud-based real estate due diligence platform in the United Kingdom, for $52.9 million. Further, the company estimates its addressable market in Canada and the United Kingdom to be $1.1 billion and $900 million, respectively. So, the company has a huge scope for expansion.
