What have investors learned about the stock market from all the turbulence? Tech and financial services stocks continue to be among the most volatile, as their valuations churn on sentiment shifts from week to week.
These sectors are ones with high potential for disruption and innovation, hence higher multiples for select names in these sectors. However, the potential impact of an upcoming recession, and clear risks around the health of the banking sector, make many disruptive growth stocks risky propositions.
That said, I think the following three disruptors may be worth a bet right now. Here’s why these stocks are on my watch list right now.
Constellation Software (TSX:CSU) is among the best growth stocks, from a historical standpoint, on the TSX. Over the long term, CSU stock has outperformed the software industry’s return on equity (ROE) average of 13% by a rather wide margin.
That’s a key metric investors should consider. It’s also very important to Constellation shareholders, as the company’s core business specializes in acquiring, managing, and nurturing vertical market software businesses. With a track record of impressive performance, Constellation has become a significant player in the technology sector.
The company employs a unique business model wherein it acquires successful software companies and grants them operational autonomy, allowing them to thrive within its corporate structure. This strategic approach has yielded remarkable outcomes, evident in consistent revenue growth and solid profitability over time.
In the past three years, Docebo (TSX:DCBO) has achieved an impressive annual revenue growth rate of 41%, outperforming many other companies that are currently experiencing losses.
Additionally, the company’s share price has shown remarkable stability, compounding at a rate of 50% over the same three-year period. Presently, Docebo has seen a remarkable increase of 236% in its share price compared to three years ago, showcasing substantial growth.
Moreover, in just the past week, the share price has surged by 5.7%, indicating positive momentum in the market.
Docebo has recently acquired Edugo.AI, an innovative Generative AI-based Learning Technology that utilizes advanced Large Language Models (LLM) and algorithms to optimize learning paths and personalize the learning experience for individual users.
The acquisition serves two primary purposes for Docebo: first, to strengthen its current AI capabilities, and second, to introduce new functionalities to the Docebo platform, ultimately enhancing the overall customer experience for its users.
TMX Group (TSX:X) is perhaps one of the more stable innovators on this list. The parent company of the TSX exchange, TMX is among the best Canadian tech companies to consider from a consistency and margins standpoint.
The stability of TMX’s core underlying business not only allows the company to pay a growing dividend yield (impressive) but also provides room for future reinvestment in its core business. As far as long-term, disruptive growth stocks are concerned, TMX Group is one worth considering, in my view.