The primary reason to invest in quality growth stocks is to benefit from outsized returns. Typically, growth stocks deliver game-changing returns over time and crush the broader market, allowing investors to accelerate their retirement plans. Here are three such growth stocks that can help you retire with $1 million in retirement. Let’s see how.
VersaBank stock
Valued at a market cap of $265 million, VersaBank (TSX: VBNK) offers various banking products and solutions to its customers in the U.S. and Canada. It is one of the major players in Canada’s business-to-business digital banking market.
The company experienced steady growth in its loan portfolio despite a sluggish lending environment and higher interest rates. It ended the July quarter with a loan portfolio of $3.7 billion, an increase of 30% year over year, while net income was up 75% year over year.
VersaBank continues to benefit from a high operating leverage. While sales were up 26% in the fiscal third quarter (Q3), its non-interest expenses fell by 6% to $12.9 million. Its efficiency ratio stands at 43%, which is the highest among banks in North America.
Down 38% from all-time highs, VBNK stock trades at 6.5 times forward earnings, which is very cheap. Bay Street forecasts VersaBank to increase earnings by 92.4% in fiscal 2023 (ending in October) and by 27.6% in fiscal 2024.
Microsoft stock
One of the largest companies in the world, Microsoft (NASDAQ: MSFT) is valued at US$2.4 trillion by market cap. Despite its massive size, Microsoft is forecast to increase its adjusted earnings by 14.5% annually in the next five years.
Microsoft enjoys a leadership position in multiple segments, such as public cloud, enterprise software, and gaming. It also has a first-mover advantage in the artificial intelligence segment with its investment in OpenAI, the parent company of ChatGPT. Microsoft’s Azure now accounts for 50% of intelligence cloud sales, suggesting its revenue soared by 27% to US$12 billion in the most recent quarter.
Analysts remain bullish on MSFT stock and expect shares to surge by over 20% in the next 12 months.
Green Thumb Industries
The final growth stock on my list is Green Thumb Industries (CNSX: GTII), which is among the largest cannabis companies in the world. It is engaged in the manufacture, distribution, and sale of various cannabis products for medical and recreational use in the U.S. Green Thumb distributes its products to third-party retail stores as well as through its own retail store network.
Green Thumb reported revenue of US$252 million and net earnings of US$13 million, or US$0.05 per share, in Q2. Its adjusted earnings before interest, tax, depreciation, and amortization stood at $76 million, indicating a margin of 30%.
While most cannabis producers are wrestling with mounting losses, Green Thumb ended Q2 with an operating cash flow of $18 million and $149 million in cash. In the last 12 months, Green Thumb has spent $240 million in capital expenditures, which should support its expansion efforts and drive future cash flows higher.
GTII stock is priced at 39 times 2024 earnings and trades at a discount of 25% to consensus price target estimates.
