Stock prices can dip due to various micro and macroeconomic factors. Some investors utilize these dips as the perfect opportunity to purchase high-quality stocks at a discount. However, buying just any stock will not be profitable. Investors need to focus on the company’s long-term growth prospects and financials to ensure that they can surpass their pre-dip price levels.
Here are three growth stocks I think are worth considering if and when times get tough.
Constellation Software
Constellation Software (TSX: CSU) is a Canadian multinational software company that specializes in industry-specific and mission-critical software. During the company’s second-quarter (Q2) 2023 earnings report, Constellation posted impressive revenue growth of 26%.
There was also a 58% increase in its cash flow from operations, with this figure reaching US$123 million. Its free cash available to shareholders also appreciated to US$14 million, indicating 22% growth from last year’s same quarter.
Furthermore, almost 40% of Constellation shares are owned by institutional investors. Now, such entities only select stocks with high long-term growth prospects and strong financials. Thus, I think if this stock dips from here, investors would do well to add it to their portfolios.
TMX Group
TMX Group (TSX: X) is an international operator of markets, exchanges and clearinghouses. It primarily operates through four segments: Equities and Fixed Income Trading & Clearing, Capital Formation, Derivatives Trading & Clearing, Global Solutions, and Insights & Analytics.
Like the other companies on this list, TMX reported a strong performance in Q2 2023. Its quarterly revenue rose to $306.2 million, which is a 7% rise from last year. Additionally, its diluted earnings per share surged to $0.35, growing 6% from Q2 2022.
Notably, TMX has also been busy increasing its dividend. The company reported that its dividend distribution will grow to $0.18 per quarter per common share this coming quarter. This represents a continued track record of dividend growth, with the company continuing to raise its distributions over the past five years. This highlights the organization’s ability to generate stable cash flows, even during uncertain market conditions.
Boyd Group
Boyd Group (TSX: BYD) is a North American non-franchised collision repair centre operator. According to the company’s most recent earnings report in mid-August, Boyd’s sales growth of 22.9% brought the company’s total revenue to a whopping US$753.2 million. That’s simply incredible and reflected in this stock’s long-term chart shown below.
Top-line growth is great. However, Boyd has also been growing in a profitable manner. That’s something investors clearly like, with the company’s stock price remaining near record highs of late.
The company’s gross profit and adjusted earnings before interest, taxes, depreciation, and amortization grew to US$342.7 million and US$95.4 million, respectively. These growth rates of 23.5% and 32.5% are among the best in the sector and highlight just how consistent Boyd has been over time.
The company added 25 new collision repair centres to its portfolio this past quarter. Notably, six of these locations were opened organically, with 19 added via acquisition. Given the fragmented nature of this sector, I think there’s plenty of growth ahead for investors. This is a stock long-term investors should consider buying on dips, in my view.
