Investors can earn superior returns by investing in quality stocks over a long period. Given the innovative nature of its business, the technology sector has a reputation for delivering superior returns in the long term. Of the several technology stocks on the TSX, I am bullish on the following two picks, which can potentially deliver multi-fold returns over the next 10 years.
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Nuvei
Nuvei (TSX:NVEI) is a Canadian fintech company that allows small and medium-scale businesses to transact through APMs (alternative payment methods), thus expanding their businesses. It operates in over 200 markets and supports 150 currencies and 669 alternative payment methods. The growth of e-commerce has increased the popularity of digital transactions, thus expanding the addressable market for the company.
Meanwhile, the Montreal-based fintech company is launching new innovative products, expanding geographically, forming new partnerships, and adding new APMs to grow its customer base and drive its financials. It recently opened a new office in China to support its growth in the Asia Pacific region. Given its healthy growth prospects, the company’s management expects its revenue to grow by 15-20% in the coming years. It is also hopeful of improving its profitability, thus raising its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin to over 50% in the long run.
Meanwhile, Nuvei trades at an NTM (next-12-month) price-to-earnings multiple of 12.3, which looks cheap given its solid performances and excellent growth prospects. Its price-to-book multiple stands at 1.7. Further, the company’s board had declared a dividend of $0.10/share in November. Considering all these factors, I expect Nuvei to deliver oversized returns over the next 10 years.
WELL Health Technologies
WELL Health Technologies (TSX:WELL) focuses on developing technologies to help healthcare professionals deliver omnichannel services to patients. It also offers extensive software applications that aid physicians in running their practices. With the digitization of clinical procedures and growth in the adoption of virtual healthcare services, the demand for the company’s services and products is rising.
Meanwhile, the Vancouver-based company is developing innovative products and investing substantially in artificial intelligence (AI) to strengthen its position. Further, the company is continuing its acquisitions and is currently working on acquiring 13 clinics through the absorption method and another 30 clinics through M&A (merger and acquisition). Amid the favourable environment and growth initiatives, the company’s management hopes to reach $900 million in revenue this year, representing an 18% increase from the previous year.
Meanwhile, WELL Health has been under pressure over the last few months, losing around 36% of its stock value compared to its 52-week high. The increase in its net losses in the third quarter appears to have made investors nervous, leading to a selloff. Meanwhile, the company has undertaken cost-optimization initiatives, which can improve its cost efficiency and boost its operating cash flows in the coming quarters.
The selloff has dragged its valuation down to attractive levels, with its NTM price-to-sales and price-to-earning multiples at one and 14.3, respectively. Given the favourable market conditions, healthy growth initiatives, and attractive valuation, I believe WELL Health would be an excellent buy for long-term investors.
