The supply concerns amid the ongoing Russian-Ukraine war have driven oil prices over $110/barrel. Gold prices have also increased by around 7% over the last 30 days. Supported by higher commodity prices, the S&P/TSX Composite Index has risen by 0.2% for this year. However, the expectation of the Bank of Canada hiking interest rates has led to a selloff in growth stocks. Meanwhile, a steep correction in the following three stocks provides an excellent buying opportunity, given their substantial growth potential.
Savaria
Amid the weakness in growth stocks, Savaria (TSX: SIS) is trading over 20% lower than its September highs. Meanwhile, the correction has provided an excellent buying opportunity for long-term investors. Last month, the company had provided a solid preliminary result for 2021. It expects its revenue and adjusted EBITDA to grow by 86.4% and 66.7%, respectively. However, its operating income could fall by $4 million to $35 million due to higher amortization expenses related to Handicare acquisition and ongoing integration costs.
Meanwhile, the uptrend in Savaria’s financials could continue amid the rising aging population, its expanded product offerings, the expansion of its distribution network amid the acquisition of Handicare, and improvement in operating efficiency. So, its management expects its revenue and EBITDA to increase by 14.8% and 20% in 2022, respectively. Also, the company trades at an attractive forward price-to-earnings multiple of 21.2 and pays monthly dividends, with its forward yield currently at 2.8%. So, I believe Savaria would be an excellent buy right now.
goeasy
Second on my list is goeasy (TSX: GSY), which has lost close to 35% of its stock value compared to its September highs. Amid the recent pullback, the company’s forward price-to-earnings multiple stands at 13. Meanwhile, the company has acquired a small share in the large and growing non-prime lending market. With the improvement in economic activities, the demand for the company’s services could also increase.
LendCare’s acquisition has added new business verticals, expanded its product offerings, and improved its risk profile. Amid the healthy growth prospects, goeasy’s management expects its loan portfolio to increase to $3.6 billion by the end of 2024. Its revenue could grow at a CAGR of over 15% for the next three years while maintaining an operating margin above 35%. Given its high-growth prospects, I believe goeasy to outperform the broader equity markets over the next three years.
Nuvei
My final pick is Nuvei (TSX: NVEI)(NASDAQ: NVEI), which has corrected by over 67% from its September highs. Along with the weakness in growth stocks, a short report from Spruce Point Capital Management dragged the company’s stock down. The correction has also dragged its forward price-to-sales multiple down to 8.3.
Meanwhile, the growth in e-commerce has increased the adoption of digital payments, thus expanding the addressable market for Nuvei. The company also introduces new innovative products, ventures into new business segments, and expands its presence to drive growth. It is increasing its presence in the growing online gaming and sports betting industry through new license wins and expansion of its customer base. So, given its high-growth prospects and discounted stock price, I expect Nuvei to deliver solid returns over the next three years.
