With 2024 upon us, it is time to figure out what stocks could propel strong returns over the year ahead. Undoubtably, none of us know what hurdles and obstacles the year will throw at us.
However, if you can pick stocks in good quality companies that are steadily growing, you can expect strong (perhaps even market-beating) returns over the long term.
Wondering what Canadian stocks could outperform the market over the next 5 and even 10 years? Here are three top growth stock picks to think about buying in January 2024.
A new financial stock for growth
With a market cap of $445 million, Propel Holdings (TSX: PRL) is not a well-known Canadian stock. The company only IPO’d (initial public offering) on the TSX in late 2021. The majority of its sub-prime lending products are offered in the U.S.
However, the company shows signs of very promising growth. It provides a lending-as-a-service platform that uses AI (artificial intelligence) to underwrite more loans at lower risk than most other lenders. The company recently expanded its third-party offerings. It also commenced a new lending platform in Canada.
Over the past three years, Propel has grown revenues and earnings per share by a respective 49% and 70% compounded annual growth rate (CAGR). It only trades for 14 times earnings, which still looks like an attractive deal after a solid run up in 2023. It also pays a 3.2% dividend yield today.
An industrial stock with great capital allocation
TerraVest Industries (TSX: TVK) is another Canadian growth stock that many Canadians have likely never heard of. It operates a mix of industrial businesses focused on energy services, tank manufacturing, heating/cooling, and specialized transport.
These are not exactly exciting businesses. However, management is both a smart capital allocator and exceptional operator. TerraVest acquires cheap businesses and utilizes operating expertise to maximize margins and juice up cash flows.
The proof is in its strong track record. Revenues and earnings per share have risen by respective CAGRs of 20% and 21% over the past five years.
The stock only trades for a price-to-earnings (P/E) ratio of 16. It also has a 1.4% dividend yield. TVK offers something for every investor and could be a good stock in 2024.
A Canadian tech stock primed for a turnaround trade
Enghouse Systems (TSX: ENGH) was once a well-known growth stock in Canada. Enghouse provides communication software that surged in the pandemic. However, that growth has pulled back, and the stock has fallen out of favour with investors.
Yet, there is a lot to like about Enghouse stock today. It has a cash rich balance sheet (around $240 million). The company has traditionally grown by acquisition. With several smaller communication businesses falling into distress, Enghouse should have plenty of buying opportunities in 2024.
Enghouse is trading at its lowest price-to-free cash flow valuation in years. It has a near 8% free cash flow yield. ENGH pays a 2.5% dividend yield, which might be attractive for dividend-growth investors.
You may have to be patient. However, once the growth returns, this Canadian stock could have considerable torque upward in 2024.
