After rising over 7.3% in the last quarter of 2023, the S&P/TSX Composite Index has maintained its uptrend, increasing by 0.3% this year. The expectation of central banks cutting interest rates this year has improved investors’ confidence, driving the equity markets higher. However, equity markets could remain volatile in the near term as several economists predict a global slowdown due to higher interest rates and conservative monetary policies.
Meanwhile, long-term investors should not worry about this short-term volatility and go long on quality stocks that can deliver superior returns in the long run. Growth stocks can grow their financials at an exceptional rate compared to the industry average, thus delivering higher returns in the long run. Here are two of my top picks, which have the potential to provide multi-fold returns over the next 10 years.
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Nuvei
Nuvei (TSX: NVEI) is a Canadian fintech company that facilitates small and medium-scale enterprises to transact digitally, including APMs (alternative payment methods). The growing popularity of digital transactions has created multi-year growth potential for the company. Meanwhile, the company is geographically expanding its footprint, launching new products, growing its APM portfolio, and forming new partnerships to grow its customer base and financials.
The Montreal-based technology company has recently partnered with Adobe and Microsoft, which could grow its customer reach. Besides, it has also opened a new office in China to strengthen its presence in the Asia Pacific region. Amid the favourable environment and growth initiatives, Nuvei’s management is confident of growing its revenue at an annualized rate of 15-20% in the medium term. Besides, management expects its adjusted EBITDA margin to cross 50% in the long run.
Despite its growth prospects, Nuvei trades at an attractive forward price-to-earnings multiple of 12.1, while its price-to-book multiple stands at 1.7. Considering all these factors, I believe Nuvei would be an excellent buy at these levels.
goeasy
Another growth stock that I am bullish on would be goeasy (TSX: GSY). The subprime lender has grown its revenue and EPS in double digits for the previous 20 years. Supported by solid financials, the company has returned over 17,000% since 2000 at an annualized rate of 24%. Despite the strong growth, goeasy has acquired a small market share in the under $45,000 sub-prime credit market. So, it has substantial scope for expansion.
With the company maintaining stable credit and payment performance, its net charge-off rate declined from 9.3% to 8.8%. Besides, its allowance for future credit losses declined from 7.42% to 7.37%. Further, the company is launching new product offerings, expanding delivery channels, and focusing on strengthening its auto financing segment to drive growth. It has also tightened its credit tolerance limits, improved its underwriting and income verification processes, and adopted next-gen credit models to lower defaults and boost operating performance.
Amid these growth initiatives, goeasy’s management is confident of increasing its loan portfolio to $5.1 billion by the end of 2025, representing a 49% increase from its current levels. Also, the company’s management expects its revenue to grow at an annualized rate of 18.5% while improving its operating margins to remain higher than 36%. So, its growth prospects look healthy.
Meanwhile, GSY stock trades at an attractive NTM price-to-earnings multiple of 9.7 and offers a healthy dividend yield of 2.42%. Considering all these factors, I am bullish on goeasy.
