The Canadian equity markets have witnessed healthy buying over the last few days, with the S&P/TSX Composite Index rising by 5.9% from last month’s lows. The lower-than-expected inflation numbers in June appear to have increased investors’ confidence, driving the equity markets higher. So, amid improving sentiments, investors could buy the following three Canadian growth stocks to earn superior returns over the next three years.
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Nuvei
Nuvei (TSX: NVEI) is one of the top growth stocks to have in your portfolio amid improving market conditions. With the expansion of e-commerce, more people are adopting digital payments, thus expanding the addressable market for the company. Meanwhile, the company is focusing on developing innovative product offerings, expanding its APM (alternative payment methods) portfolio, increasing its geographical reach, and strengthening its sales and marketing team, which could continue to drive its financials in the coming quarters.
Meanwhile, Nuvei’s management expects to spend 4-6% of its sales on capital expenditure in the medium term. Supported by these investments and favourable market conditions, the company’s management hopes to grow its revenue at a CAGR (compound annual growth rate) of 20% in the medium term. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin could reach 50% in the long term. Despite its healthy growth prospects and optimistic guidance, the company trades at an attractive NTM (next 12-month) price-to-earnings multiple of 15.3, making it an attractive buy.
goeasy
goeasy (TSX: GSY) has witnessed substantial selling amid the news of the government looking to lower the maximum allowable interest rate to an annual percentage rate (APR) of 35% from 47%. However, the company has made a healthy recovery but still trades at over 43.5% discount compared to its 2021 highs. Meanwhile, the company’s valuation looks attractive, with its NTM price-to-sales and NTM price-to-earnings multiples at 1.6 and 8.7, making it an attractive buy.
Meanwhile, around 64% of its loan portfolio carries interest rates lower than 35% APR. The company is making enhancements to products, pricing, and cost structures to lower the impact of the decline in the maximum allowable rate. Also, with inflation showing signs of cooling down, the federal reserve could ease its monetary tightening initiatives, thus supporting economic growth and loan origination.
Meanwhile, the company’s management expects its loan portfolio could reach $5.1 billion by the end of 2025, representing a growth of 70% from its current levels. Notably, the company also rewards its shareholders with a quarterly dividend of $0.96/share, with its forward yield at 3.1%. Considering all these factors, I believe goeasy would be an excellent buy.
BlackBerry
My final pick is BlackBerry (TSX: BB), which has exposure to high-growth sectors, such as cybersecurity and IoT (Internet of Things). With the growing interest in connected and autonomous vehicles, the demand for its products and services could rise. The company has launched highly scalable and high-performance operating systems that could aid in developing new products for next-gen vehicles.
Amid the growing demand, the launching of new innovative products, and design wins, the company’s management expects the revenue from its IoT segment to grow at a CAGR of 18-22% over the next three years. Meanwhile, the company is also expanding its product offerings in cybersecurity by launching innovative products to strengthen its position.
Given its unique positioning in both cybersecurity and IoT, McKinsey believes BlackBerry is well positioned to benefit from the convergence of cybersecurity and IoT, which would create a market of $750 billion by 2030.
