While the stock market is under pressure for various reasons, including inflation, uncertainty around interest rate hikes, and the Russia-Ukraine crisis, it has created plenty of buying opportunities for investors with a long-term mindset.
So, if you got some extra cash, which you will not require for any emergency purpose, consider adding a few top-quality stocks to your portfolio right now. While several TSX stocks have corrected quite a lot, here are my three picks that could deliver outsized returns in the long term.
Shopify
Considering the massive drop in its price and strong upside potential, Shopify (TSX: SHOP)(NYSE:SHOP) is an obvious bet to create wealth in the long term. The recent selling in Shopify stock has wiped out COVID-led gains, while its valuation is at a multi-year low.
Shopify stock has corrected about 61% from its 52-week high. Further, it is down about 51% this year on growth concerns. Notably, SHOP stock is trading at a forward EV/sales multiple of 13.1, which is well below its historical average, creating a solid buying opportunity at current levels.
While Shopify’s management expects its revenue growth to be lower than 2021 levels, this doesn’t surprise much amid difficult year-over-year comparisons (mainly in the first half) and economic reopening. Though Shopify’s growth could moderate a bit in the near term, it could reaccelerate in the latter part of this year on the back of the strong demand for its multi-channel e-commerce platform.
The expansion of its product suite, increasing geographic footprint, adoption of its payments solutions, growing social commerce offerings, and strengthening of its own fulfillment network provide a solid base for long-term growth.
Nuvei
Nuvei (TSX: NVEI)(NASDAQ: NVEI) is another stock that is trading cheap and has strong potential for growth. It’s worth noting that sector-wide valuation compression and a short report weighed on Nuvei stock. However, its management remains confident and expects to deliver +30% revenue growth per annum in the medium-term, supporting my bullish outlook.
Nuvei stock is trading at a forward EV/sales multiple of 8.8, which is attractive. Meanwhile, its growing portfolio of alternative payment methods, growing capabilities in the high-growth verticals, expansion of product suite, and opportunistic acquisitions will likely accelerate its growth and drive its stock price higher.
Overall, Nuvei’s growing scale, increasing geographic footprint, innovation, investments in marketing, and low valuation support my bullish outlook.
Absolute Software
Absolute Software (TSX: ABST)(NASDAQ: ABST) stock benefitted from the acceleration in demand amid the COVID-19 pandemic. However, economic reopening, moderation in growth, and macro headwinds have led to a significant correction in its price. Notably, Absolute Software stock has dropped about 43% from its 52-week high and is trading at a forward EV/sales multiple of 3.2, which compares favourably to its peer group average as well as historical average.
While Absolute Software stock is trading cheap, its annual recurring revenues continue to grow well on the back of ongoing momentum in the enterprise segment. Moreover, its focus on product innovation, geographic expansion, customer acquisitions, and high retention rate augur well for growth.
Also, opportunistic acquisitions and increasing revenues from existing customers will likely support its growth.
