Amid macro and geopolitical concerns, investors have turned their back on unprofitable high-growth stocks in 2022, leading to a massive price correction. Given the selling, shares of the companies that have consistently delivered profitable growth have also declined. This has created a buying opportunity in those stocks for long-term investors.
Against that backdrop, let’s look at two such high-growth companies that are profitable while their shares are trading cheap.
goeasy
Let’s begin with the shares of the financial services provider goeasy (TSX: GSY). It has been growing its revenues at a CAGR of 15.9% over the past decade. During the same time, its adjusted EPS increased at a CAGR of 29.1%.
goeasy’s rapid growth is supported by a large subprime lending market, expansion of its loan portfolio, and strong payment volumes. Meanwhile, operating leverage cushions its bottom line. During the most recent quarter, goeasy’s loan originations increased by 75%. Meanwhile, its loan portfolio expanded by 69%.
Its easyfinancial segment’s revenue increased 46% year over year, driven by higher loans and customer acquisitions. Further, the growing penetration of secured loans is positive. goeasy’s credit and payments performance remained stable while it continued to enhance its shareholders’ return through share repurchases and dividend payments.
With the ongoing momentum in its business, goeasy is poised to deliver stellar revenue and earnings growth in the coming years. Higher loans, expansion of products and channels, and growing geographic footprint augur well for growth. goeasy expects its revenues to increase at a double-digit rate through 2024. Meanwhile, solid credit performance and operating leverage are expected to drive its earnings.
Thanks to its high-quality earnings, goeasy has increased its dividend for eight consecutive years. It recently hiked its dividend by 38% and is on track to increase it further in the coming years.
While goeasy continues to impress with its financial performance, its stock has corrected by 51% from its 52-week, representing a solid buying opportunity.
Enghouse
Enghouse (TSX: ENGH) benefitted a lot amid the pandemic. It offers enterprise software and solutions that facilitate remote work, communication, customer interaction, supply-chain, transit, and public safety. While the reopening of the world and tough year-over-year comparisons lead to a slowdown in its growth, its focus on driving earnings through internal growth and acquisitions will likely support its financials and share price.
It’s worth mentioning that Enghouse’s top line has grown at a CAGR of 7.5% between FY17 and FY21. Meanwhile, its adjusted EBITDA per share has increased by 11.8% during the same period.
Looking ahead, ongoing digital shift, cloud-based recurring revenues, progress on several large professional services projects, ability to increase pricing, and opportunistic acquisitions bode well for future growth. Moreover, its focus on operational efficiencies and cost savings will likely cushion its earnings.
Enghouse generates strong cash flows to fund its growth and dividend payments. Moreover, it has no long-term debt on its balance sheet. Moreover, Enghouse’s focus on enhancing shareholders’ value through higher dividend payments (its dividend has a CAGR of 14.5% between FY17 and FY21) makes it an attractive long-term bet. Its stock has dropped more than 51% from the 52-week high, creating a good entry point.
