Companies with a market capitalization of over $2 billion and less than $10 billion fall into the mid-cap category. These companies offer higher growth prospects than large-cap stocks while they are less risky than small-cap stocks. Because mid-caps provide the best of both ends of the risk spectrum, risk moderation and substantial returns, they are a must in your portfolio. Here are my three top mid-cap stocks that you could add to your portfolio right now.
Nuvei (TSX:NVEI) is a Canadian fintech company that allows its clients to transact through nextgen payments. It supports over 600 APMs (alternative payment methods). Amid the growing popularity of digital payments and its geographical expansion, the company has continued to grow its financials at a healthier rate. From 2018 to 2021, revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) have grown at a CAGR (compounded annual growth rate) of 69% and 84%, respectively.
Although the growth has slowed down this year, Nuvei’s management hopes to grow its revenue at an annualized rate of over 30% in the medium term while expanding its adjusted EBITDA margin to over 50% in the long run. The strengthening of its infrastructure to simultaneously support higher transactions, innovative product launches, and the Paya Holdings acquisition could support its growth.
Meanwhile, the weakness among growth stocks has dragged Nuvei’s stock price down, with the company trading at a 77% discount from its all-time high. Currently, its NTM (next 12 months) price-to-earnings stands at 14.6, making it an attractive buy.
With a market cap of $2 billion, goeasy (TSX:GSY) would be my second pick. Over the last five years, the company has grown its revenue and diluted EPS (earnings per share) at a CAGR of 20% and 27%, respectively. Supported by loan originations of $632 million in the fourth quarter of fiscal 2022, the company’s loan receivable portfolio increased to $2.8 billion. The prudent non-prime lender’s net charge-off rate declined by 60 basis points to 9%, within the company’s guidance of 8.5% to 10.5%.
Meanwhile, goeasy’s management hopes to grow its loan portfolio by 79% to $5 billion by the end of 2025. The company’s expanded product offerings, omnichannel distribution channels, and addition of new verticles could expand its loan receivables. The lender also projects its revenue to grow at a CAGR of 27% through 2025 while delivering return-on-equity of over 22% annually. The company has raised its dividends for nine consecutive years, with its yield for the next 12 months at 3.05%. Considering its growth prospects, healthy dividend yield, and attractive NTM price-to-earnings multiple of 8.9, I believe goeasy would be an attractively valued buy.
Third on my list would be Cargojet (TSX:CJT), an air cargo company that offers overnight delivery services to prominent cities in Canada and abroad. Notably, the company’s financials are predictable, with 75% of its domestic revenue underpinned by long-term contracts. Further, the growing adoption of online shopping and increased internet penetration are driving e-commerce growth, thus increasing the demand for air cargo services.
Amid the growing demand, Cargojet plans to add another 12 aircraft to its fleet, which could boost its financials. However, the company has lost over half its stock value compared to its all-time highs due to an uncertain economic outlook and rising interest rates. The sell-off has dragged its valuation to an attractive territory, with its NTM price-to-earnings multiple standing at an attractive 18.3.