Investing in growth stocks could fetch significant returns in the long term. As these companies tend to grow faster than peers, the chances of them beating the broader markets in the longer term is higher. Take goeasy (TSX:GSY), Nuvei (TSX:NVEI)(NASDAQ:NVEI), and Docebo (TSX:DCBO)(NASDAQ:DCBO) for instance. These Canadian companies are consistently growing their financials at a breakneck pace, indicating that they could outperform the benchmark index.
Let’s look at catalysts that are fuelling above-average growth in their financials.
Financial services company goeasy has consistently delivered strong double-digit growth in its revenue and earnings. To be precise, its revenue has had a CAGR of 15.9% since 2011. Moreover, its net income has a CAGR of 38.2%. In FY21, goeasy’s top line increased by 27%. Meanwhile, its adjusted net income marked 49% growth. Thanks to its solid earnings base, goeasy has raised dividend for eight consecutive years at a CAGR of 34.5% and offers a yield of 2.6%.
Looking ahead, goeasy expects its revenue to increase at a double-digit rate, reflecting higher loan origination, benefits from the acquisition, new product launches, and channel expansion. Moreover, the large subprime lending market, growing ticket size, and increased penetration of secured loans augur well for growth. Also, operating leverage from higher sales and strong payment volumes could help the company sustain double-digit earnings growth.
With multiple growth catalysts, strong earnings, and the focus on enhancing shareholders’ returns, goeasy is a solid investment to outperform the broader market averages.
Like goeasy, Nuvei is growing fast. In 2021, Nuvei’s revenue increased by 93%, reflecting 61% organic growth. Further, its adjusted EBITDA increased by 95%.
Its robust growth comes from the continued strength in e-commerce, which represented about 86% of total volume in 2021. Furthermore, its growing alternative payment methods, including digital wallets and cryptocurrencies, increasing customer base, and product innovation continue to drive its financials. Also, its foray into high-growth verticals, increased revenue from existing customers, large addressable market, and opportunistic acquisitions suggest that Nuvei is well positioned to rapidly grow its revenue and adjusted EBITDA.
It projects 30% annual growth in its volume and revenue for the medium term. Further, it expects to deliver an adjusted EBITDA margin of 50% in the long run. While Nuvei is well positioned to deliver robust growth, its stock is trading at a considerable discount, which provides a solid entry point at current levels.
Docebo is another top-quality TSX growth stock that is trading cheap. Notably, it continues to grow its financials at a solid double-digit rate due to the continued strength in its organic revenue. Docebo’s revenue jumped 66% in 2021, while its subscription revenue represented 92% of the overall sales, which is encouraging.
Further, its customer base increased to 2,805 in 2021 from 2,179 in 2020. Moreover, its average contract value and net dollar retention rate improved, which is positive. Its strong annual recurring revenue, higher enterprise spending, growing customer base, and large deal size could continue to support its growth. Moreover, opportunistic acquisitions, multi-year contracts, and productivity savings bode well for growth.
While Docebo is growing its financials fast, its stock has witnessed a pullback, representing a buying opportunity.