It’s advisable for Canadians to create a nest egg for retirement that will help them support a comfortable lifestyle. In 2019, a Survey of Households report stated that Canadian couples over the age of 65 spend $48,453 on average each year.
So, if you spend 25 years in retirement, your retirement nest egg should grow to $1.2 million, and this number may be lower for individuals.
But it’s important to have a long-term investment horizon if you want to save $1 million for retirement. You can build a well-diversified portfolio across asset classes that comprise index funds, bonds, and even gold.
So, an investment of $1,300 each month will help you earn $1 million over two decades, given annual returns of 10%. But for those with a higher risk appetite, investing in quality growth stocks can help you generate exponential gains and accelerate your retirement plans.
Here are two such growth stocks that can turn a $50,000 investment into $1 million.
Nuvei stock
A Canadian company operating in the fintech space, Nuvei (TSX: NVEI) is currently valued at a market cap of $6 billion. Nuvei has grown its revenue from $245.8 million in 2019 to $843 million in 2022 on the back of highly accretive acquisitions.
In Q1 2023, the total volume processed on the Nuvei platform rose 45% to $42.4 billion, allowing sales to rise by 20% to $256.5 million. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) stood at $96.3 million, compared to $91.6 million in the year-ago period.
We can see that a sluggish economic environment has resulted in higher operating expenses for Nuvei, dragging profit margins lower.
Priced at 3.4 times forward sales and 15.2 times forward earnings, NVEI stock is really cheap, as analysts expect the bottom line to expand by 46% annually in the next five years. The TSX stock is priced at a discount of almost 70% to consensus price target estimates.
Snowflake stock
One of the fastest-growing companies globally, Snowflake (NYSE: SNOW) provides a cloud-based data analytics platform for enterprises. It enables companies to mobilize data at scale while executing diverse analytic workloads.
The company ended Q4 of fiscal 2023 with $3.7 billion in remaining performance obligations, or RPOs. This metric is the total amount existing customers are contracted to spend in the future, which provides investors with top-line visibility.
In Q4 of fiscal 2023 (ended in January), Snowflake grew revenue by 54% year over year to $589 million. It ended the quarter with a net customer retention rate of 158%, which suggests existing customers increased spending by 58% on the Snowflake platform in the last year.
Snowflake has onboarded almost 8,000 customers, 330 of whom spend at least $1 million annually on its platform.
Snowflake continues to expand its profit margins, reporting a gross margin of 75% in fiscal 2023, compared to 69% in 2021. Analysts expect adjusted earnings to rise by 66% annually in the next five years.
The Foolish takeaway
Snowflake and Nuvei are just two examples of quality growth stocks. You need to identify similar companies that trade at an acceptable valuation with stellar revenue growth rates and widening profit margins to build a robust equity portfolio and lower overall risk.
