Last week, the Labor Department of the United States announced that the Consumer Price Index rose by 3.2% in July compared to its previous year’s month. It was a 0.2% increase from June. However, it was lower than analysts’ projections of 3.3%. So, the July inflation numbers have increased investors’ confidence, driving the equity markets. The S&P/TSX Composite Index rose 0.85% last week and is up 5.3% for the year.
Amid improving investors’ sentiments, here are two top growth stocks you can buy and hold forever to earn superior returns.
WELL Health Technologies
WELL Health Technologies (TSX:WELL) recently posted its second-quarter performance, with its revenue growing by 21.8% to $170.9 million. It was the 18th consecutive quarter of record revenue. Solid growth across its segments, Canadian patient services, Well Health United States patient services, and SaaS and technology services, drove its topline. During the quarter, the digital healthcare company had over one million patient visits and 1.5 million patient interactions, representing an annualized patient interactions of 5.9 million.
Amid top-line growth, WELL Health’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) increased by 5.1% to $27.8 million. Meanwhile, adjusted EBITDA to WELL’s shareholders increased by 16.2% compared to its previous year’s quarter. Despite the top-line growth, its adjusted net income declined from $17.5 million to $14.4 million. However, the company has managed to lower its net debt to shareholder-adjusted EBITDA ratio from three to 2.3, which is encouraging in this inflationary environment.
Further, the company’s long-term growth prospects also look healthy. The increased adoption of virtual healthcare services has created a multi-year growth potential for the company. It continues to make strategic acquisitions to expand its footprint and is investing in artificial intelligence to develop innovative applications and tools. Amid these innovations and its expansion efforts, I expect WELL Health to be well positioned to drive its financials in the coming years. Further, it trades at 1.2 times analysts’ projected sales for the next four quarters, making it an attractive buy.
goeasy
goeasy (TSX:GSY) has continued to drive loan originations, which rose 6% to $667 million in the June-end quarter. Strong demand led to record applications, thus driving its loan originations. Meanwhile, its customer loan portfolio expanded to $3.2 billion compared to $2.37 billion in the previous year’s quarter. Amid the growth in consumer loans, its revenue grew by 20% to $303 million.
Notably, the subprime lender witnessed stable credit and payment performance during the quarter, with its net charge-off rate at 9.1%, within the acceptable rate of 8-10%. Its operating income grew by 30% while its operating margin expanded by 2.7% to 36.5%. Amid top-line growth and expansion of operating margins, the company’s net profits increased by 45% to $55.6 million. However, removing one-time or special items, its adjusted net income came in at $56.0 million, representing a 20% increase from the second quarter of 2022.
Further, goeasy’s management has maintained its long-term guidance, projecting its customer loan portfolio to reach $5.1 billion by the end of 2025. The management also expects its revenue to grow at a CAGR (compound annual growth rate) of 18.5% through 2025 while delivering an annual return on equity of over 21%. It offers a quarterly dividend of $0.96/share and trades at 8.9 times its projected sales for the next four quarters, making it an attractive buy.
Investors’ takeaway
Given their long-term growth prospects and attractive valuations, I believe the two Canadian growth stocks could deliver superior returns in the long run.
