Growth stocks come in a variety of shapes and sizes. Some stocks offer more consistency than capital appreciation potential. Others spike instead of growing at a stable pace, but these spikes offer more growth in months than consistent growth stocks offer in years.
One thing that most investors associate with growth stocks, regardless of the type, is high risk. Every stock comes with certain risks, but they are significantly lower in blue-chip dividend stocks than growth stocks capable of growing you’re your capital in about three to four years.
Safe stocks that offer this kind of growth are a bit rare but not an anomaly. And an example of a safe stock that is also capable of doubling in value is Boyd Group Services (TSX:BYD).
A safe company
Boyd Group owns one of the largest networks of non-franchised collision repair centers. The company owns about 819 collision repair centres in Canada and the US. The collision centres under its banner operate under the brand name Boyd in Canada and Gerber collision and glass in the U.S. It has also expanded to include retail stores specializing in auto glasses and claim services, primarily in the U.S. (under different brand names).
How does this translate to safety? The company has roots in the community, a leadership position in a niche market, geographically and operationally diversified revenue sources, and minimal competition. The bulk of its revenue is generated in the U.S. (about 85 to 90 percent), where it has a presence in 30 states. The rest comes from Canada.
But what makes Boyd’s revenue even more reliable is that about 90% of them come from insurance companies, and only 10% comes directly from customers. This B2B revenue generation, solidified by well-established contracts, is a major strength.
A stock capable of doubling your money
The pandemic hit almost all businesses, and Boyd is no exception. The company saw both the revenues and the stock dip. The revenues are back to pre-pandemic levels now, and the stock, which fell almost 40% during the crash, reached its pre-pandemic levels in January 2021.
Despite this dip and recovery, the stock has returned about 97% in the last three years and almost 200% in the last five years. And if we consider its 10-year compound annual growth rate (CAGR) of 39.3%, the stock can double in less than three years. But even with its three-year CAGR, the stock is ideally positioned to double in the next three years.
The only possible detriment in the way of 100% growth in the next five years is the current valuation. The growth stock is quite overvalued right now, but all the other fundamental strengths still stand. It has an impressive footprint, strong financials, stable revenue sources, and a stellar dividend history. It’s quite possible to grow your investment capital by 100% with this safe growth stock.
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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Boyd Group Services Inc.