Growth stocks are the companies that have the potential to grow their financials above the industry average, thus delivering superior returns in the long run. These companies usually require higher capital to fund their growth initiatives and trade at higher valuations. If an investor can grow his investment of $10,000 at a CAGR (compound annual growth rate) of 15%, he would have over $40,000 by the end of 10 years.
Meanwhile, the following three growth stocks have the potential to deliver over 15% of returns annually for the next 10 years.
Nuvei
Nuvei (TSX: NVEI) has been under pressure over the last few days amid weak second-quarter earnings, the lowering of its 2023 guidance, and the loss of a significant customer. It has lost around 46% of its stock value this month and is down over 85% from its 2021 highs. Meanwhile, given its healthy long-term growth potential, I believe the selloff is overdone.
Digital payments are gaining momentum and could grow in the double digits for the rest of the decade, thus increasing the addressable market for the company. Meanwhile, the payment processing company focuses on improving its product offerings, expanding its APM (alternative payment methods) portfolio, and venturing into new markets, which could boost its financials. Also, the company is strengthening its position in the iGaming segment through new customer wins.
Meanwhile, the recent selloff has dragged its valuation down to attractive levels, with its NTM (next 12-month) price-to-sales and NTM price-to-earnings multiples at 1.9 and 9.4, respectively. Considering all these factors, I believe Nuvei could deliver solid returns over the next 10 years.
WELL Health Technologies
Another growth stock that has the potential to deliver superior returns over the next 10 years would be WELL Health Technologies (TSX: WELL), which provides a comprehensive healthcare and digital platform to practitioners to offer omnichannel services. The company has been delivering solid financials amid organic growth and strategic acquisitions. In the recently reported second-quarter earnings, the company’s top line and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by 21.8% and 16.2%, respectively.
The digital healthcare company had over one million patient visits and 1.5 million patient interactions during the quarter. Meanwhile, the growing popularity of virtual healthcare services has created a multi-year growth potential for the company, which has launched an artificial intelligence investment program to develop next-generation tools. It is continuing with its acquisitions to expand its footprint across North America, which could drive its financials in the coming years.
Despite its healthy growth potential, WELL Health’s NTM price-to-sales and NTM price-to-earnings multiples stand at 1.3 and 14.5, respectively, making it an attractive buy.
BlackBerry
My final pick is BlackBerry (TSX: BB), which operates in high-growth markets like IoT (Internet of Things) and cybersecurity. The demand for the company’s services is rising amid digitization and the rising popularity of connected cars. Its QNX platform runs on 235 million vehicles. Meanwhile, the company recently introduced a highly scalable and high-performance operating system, which could aid in developing next-generation tools.
The intelligent security software firm has also strengthened its cybersecurity solutions portfolio by introducing new AI-powered solutions. McKinsey projects IoT and cybersecurity sectors are converging to create an addressable market of $750 billion by 2030. Given its specialization in both sectors, BlackBerry is well equipped to benefit from this convergence.
Meanwhile, BlackBerry is witnessing healthy buying over the last few days amid reports of a takeover from Veritas Capital. However, there is no official statement from the company. So, considering its growth prospects, I believe BlackBerry would be an excellent long-term buy.
