If you have an extra $5,000 that you don’t need for at least the next three years, you might consider investing in some growth stocks to grow your wealth. Here are a couple of the best growth stocks to buy right now.
goeasy
goeasy (TSX: GSY) is a super growth stock. The past could be indicative of future performance. From 2012 to 2022, the stock delivered annual total returns of 32.8%. Essentially, an initial investment of $10,000 compounded to $227,257 for almost a 23-bagger!
GSY Price to Book Value data by YCharts
The stock is down 54% from its 2021 height. In hindsight, from the price-to-book chart above, it’s easy to see that there was a big bubble in the stock in 2021. Then there were rising interest rates in 2022, which made it costlier for consumers to borrow and weighed on the stock’s valuation.
The Canadian non-prime consumer lender has a leading position in the space. However, the federal government’s crackdown of the industry drove the latest selloff of about 11% in the stock in the past few days. Specifically, the maximum allowable interest rate will be reduced to 35%.
This will have a big impact on smaller players. As a larger player, goeasy has operating leverage. Since inception, its weighted average annual interest rate that it charges its customers has dropped from approximately 45% to 30%. Despite this news, the company anticipates it has the ability to continue increasing its adjusted earnings per share (EPS).
From 2012 to 2022, goeasy increased its adjusted EPS at a compound annual growth rate (CAGR) of 29.5%. Even if this growth rate were to be cut by 60% to 11.8%, it still trades at a good discount at about 7.8 times earnings at $95.49 per share at writing. At this quotation, the dividend stock also offers a good yield of 4%.
Walt Disney
Like the rides at its theme parks, Walt Disney (NYSE: DIS) stock went for a thrill ride in the last six years or so. During the pandemic, due to economic shutdowns that restricted its theme parks and cruises from operating, the stock fell more than 40% from its peak to as low as the US$86-per-share level.
After that, investors became overly bullish on the stock, as the entertainment company rolled out its own streaming services. This pushed the stock up by about 129% to approximately US$197. However, in reality, its streaming platforms required large capital investments and lost money initially.
With the hype gone, the stock crashed to around the US$86 level again last year. Since the crash, the stock has been largely trading in a sideways channel between US$90 and US$120. This consolidation could indicate it’s a good time to pick up Disney shares on the cheap. Since November 2022, Bob Iger has returned as Disney’s chief executive officer for a couple of years with the goal of reigniting Disney’s growth and helping name a successor for the company.
At writing, the growth stock trades at about US$100 per share. Currently, the analyst consensus projects an EPS growth rate of about 20.4% over the next three to five years. If strong earnings and cash flow growth materialize, DIS stock could revisit the US$150 range in a few years, driving annualized returns of north of 14%. Also, if Disney were to reinstate its dividend, it would further boost investor confidence. Perhaps we will see a Disney dividend by next year.
