Growth stocks will grow their financials higher than the industry average. So, these companies tend to deliver superior returns over the long run. However, these companies require higher capital to fund their growth initiatives. With the central bank expected to tighten money supplies, growth stocks have witnessed a significant pullback over the last few months. Meanwhile, the correction presents an excellent entry point for long-term investors. If you want to add growth stocks to your portfolios, here are my three top bets.
Waste Connections
Waste Connections (TSX: WCN)(NYSE: WCN), which had delivered impressive returns of 160% over the last five years at a CAGR of 21%, is under pressure this year amid the weakness in growth stocks. It has lost 11.4% of its stock value. However, the company had delivered a solid fourth-quarter performance yesterday, with its revenue and adjusted EPS increasing by 16.2% and 22.1%, respectively.
In 2021, Waste Connections had completed acquisitions worth $400 million, which could contribute 6% of financial growth in 2022. Combining the growth with a 6.5% price rise, the company’s revenue, adjusted EBITDA, and adjusted free cash flows in 2022 could increase in double digits. Further, the company expects to make a capital expenditure of $850 million, generating an adjusted free cash flow of $1.15 billion. So, given its healthy growth prospects and a discounted stock price, I am bullish on Waste Connections.
Suncor Energy
Suncor Energy (TSX: SU)(NYSE: SU) has been one of the top performers over the last 14 months, with returns of 83% since the beginning of 2021. The increase in oil prices and its strong performances have driven its stock higher. Oil prices are currently trading well above $90/barrel. With the continuing tension between Russia and Ukraine, analysts expect oil prices to strengthen further.
Given its long-life, low-decline assets, Suncor Energy could cover all its operating expenses, sustaining capital investments, and dividends at WTI oil trading at $35/barrel. So, with oil prices trading well above those levels, the company’s margin could widen. Further, the company expects to increase its upstream production by 5%. The refineries utilization could also increase amid the rising demand for petroleum products. So, Suncor Energy’s outlook looks healthy.
However, the company is still currently trading below its pre-pandemic levels, with its forward price-to-earnings multiple standing at an attractive 7.9. So, Suncor Energy would be an excellent buy right now.
Docebo
Docebo (TSX: DCBO)(NASDAQ: DCBO) had a solid beginning as a public company amid a surge in demand due to the pandemic. However, with the easing of restrictions and expectation of interest rate hikes, its stock price has declined by 39.7% from its September highs. Investors fear that the demand for the company’s products and services could decrease with the reopening of the economy.
However, I believe the steep correction has provided an excellent entry point for long-term investors. E-learning systems are becoming popular among business enterprises due to their cost effectiveness. So, I expect the demand for the company’s products and services to sustain even after the pandemic. Further, the company has been growing its recurring revenue at a CAGR of 65% over the last five years, which is encouraging. Supported by its innovative products, the company is expanding its customer base and average contract value at a healthier rate. So, its outlook looks healthy.
