After a subdued performance in 2022, growth stocks are witnessing healthy buying this year as inflationary pressure eases. As the recovery rally begins, here are my three top picks you can buy and hold beyond 2023.
Image source: Getty Images
goeasy
goeasy (TSX: GSY) is an alternative financial services company that has been delivering consistent performance over the last 20 years. Revenue and adjusted EPS (earnings per share) are growing in double digits. Last year, revenue and adjusted EPS grew by 23% and 11%, respectively, owing to stable credit and payment performance. Although the net charge-off rate increased by 30 basis points to 9.1%, it was within the company’s guidance of 8.5%–10.5%.
Meanwhile, given the highly fragmented subprime lending business and goeasy’s expanded product offerings and omnichannel distribution channels, I expect the uptrend in the company’s financials to continue. Management expects its loan portfolio to grow at a CAGR (compounded annual growth rate) of 21.5% through 2025. Boosted by its expanding loan portfolio, the company expects its revenue to grow at an annualized rate of 18.5% through 2025 while delivering annual returns of over 22%
Amid healthy buying in growth stocks, goeasy is trading 12.8% higher this year. Despite the rise, it still trades over 40% lower than its 2021 highs while its NTM (next 12 months) price-to-earnings multiple stands at 8.5. Also, the company has raised its quarterly dividends for nine consecutive years, with its yield currently at 3.19%. Considering all these factors, I expect goeasy to outperform the broader equity markets in the coming years.
Nuvei
Nuvei (TSX: NVEI) is a fintech company facilitating business’ transactions using next-gen payments. It reported fourth-quarter performance yesterday, with revenue growing by 4%. The solid organic growth overcame unfavourable currency translation and volatility in digital assets and cryptocurrencies to drive its topline. Excluding digital assets and cryptocurrencies, the company’s revenue in constant currency grew by 26%. Additionally, adding new alternative payment methods (APMs), new product releases, and new business revenues drove its topline.
Despite its topline growth, Nuvei’s adjusted net earnings declined by 4% due to increased SG&A (selling, general and administrative) and interest expenses. The company generated an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of US$85.7 million, representing a 6% decline from the previous year. The payment processor closed the quarter with a cash balance of $752 million. So, it is well-positioned to fund its growth initiatives.
Further, despite the challenging market conditions, Nuvei’s management has provided optimistic guidance for 2023. Management expects its revenue to grow by at least 45% this year while its adjusted EBITDA could increase by 30%. Given its optimistic guidance and discounted stock price, I expect the uptrend in Nuvei’s stock price to continue.
Nutrien
My final pick would be Nutrien (TSX: NTR), trading around 13% higher this year. Last month, the global fertilizer producer posted solid 2022 results, with its revenue and adjusted EPS growing by 37% and 112%, respectively. Higher price realization and strong performance from its retail segment drove its financials. With its solid cash flows, the company repurchased 53 million shares last year, contributing to its EPS growth.
With the persistence of global supply disruptions and growing demand for crop inputs, the business outlook for Nutrien looks healthy. Besides, the company has strengthened its global retail network by making 21 acquisitions across Brazil, the United States, and Australia.
Additionally, Nutrien has repurchased 8 million shares this year and approved repurchasing an additional 5% of the outstanding shares this year. Meanwhile, the company has also raised its quarterly dividend by 10% to $0.53/share, with its forward yield at 1.9%. So, given the favourable market conditions, its growth initiatives, and attractive NTM price-to-earnings of 8.5, I expect the uptrend in Nutrien’s stock price to continue.
