It appears that growth stocks have once again caught investors’ eye, as a bunch of them have registered stellar gains year to date. First, the economy turned out better than what many market experts predicted. Further, the rebound reflects the moderation in the inflation rate, which lifted investors’ sentiment and paves the path for a slowdown or pause in further interest rate hikes.
While several Canadian stocks have delivered exceptional returns so far this year, the recovery is far from over, and there could be more gains on the way. So, let’s look at the three hottest Canadian stocks that could deliver explosive growth.
WELL Health
Shares of digital healthcare company WELL Health (TSX: WELL) have rebounded swiftly in 2023. The stock has gained over 67% year to date, reflecting its robust financial performance despite economic reopening and macro uncertainty. While WELL Health stock has marked considerable growth, it has more room to run, considering its low valuation.
Impressively, WELL Health has managed to grow its revenues rapidly in the post-pandemic world. Its ability to drive omnichannel patient visits supports its top line. Further, its management remains upbeat and expects the momentum in its revenue to sustain. Given the strength in its business, WELL Health’s management raised its 2023 revenue guidance.
Besides omnichannel patient visits, the tech stock will likely benefit from the continued growth in its high-margin virtual services business. Further, its focus on accretive acquisitions and investments in AI (artificial intelligence) will drive its addressable market and new product development.
WELL Health turned profitable and continues to grow rapidly. However, its stock is trading extremely cheaply. It is trading at the next 12-month enterprise value-to-sales multiple of 2.1, which is about one-fifth of its pre-COVID levels. Overall, its high growth and low valuation indicate that WELL Health stock could deliver explosive growth in the future.
Payfare
Payfare (TSX: PAY) is another attractive stock that should be on investors’ radars. The fintech offers digital banking and payments solutions to the gig economy workforce and witnessed a recovery in its share price in 2023. Despite macro headwinds, the company has managed to grow its top line, led by a higher active user base. Furthermore, Payfare has consistently generated positive adjusted earnings before interest, taxes, depreciation, and amortization in the past several quarters.
Payfare’s strategic partnerships with the leading ride-sharing and food-delivery platforms indicate that the company could continue to deliver steady growth. Meanwhile, expansion into international markets and new customer wins position it well to deliver solid growth.
Looking ahead, its recurring revenue base, lower customer acquisition costs, and new product launches bode well for future growth.
goeasy
goeasy (TSX: GSY) is another explosive growth stock. The subprime lender has delivered massive returns in the past decade. However, the fear of recession led investors to dump its stock. Nonetheless, the company continues to generate solid double-digit revenue and earnings growth. Meanwhile, its stock is trading too cheaply to ignore.
goeasy stock is trading at a next 12-month price-to-earnings ratio of 7.7, well below its pre-COVID levels of 11.5.
This pullback in goeasy is an excellent opportunity for investors to buy and hold the shares of this high-growth company. Its high-quality loan originations and stable credit performance position it well to deliver solid sales and earnings. Moreover, its omnichannel offerings and wide product range are positives.
Management expects to deliver double-digit sales growth in the medium term. Meanwhile, its operating margins are expected to expand by 100 basis points during the same period. Overall, goeasy is a must-have stock to generate outsized returns in the coming years.
