Due to their growth potential and resilience against market volatility, mid-cap stocks suit investors with long-term investment horizons and moderate risk-tolerance abilities. With these companies having completed the uncertain initial start-up phase, they are less riskier and have the potential to expand, thus delivering superior returns. Meanwhile, here are my three top picks.
Nuvei (TSX:NVEI), with a market capitalization of $4.5 billion, is my first pick. The Canadian fintech company facilitates small and medium-scale businesses to transact through digital payments, including APMs (alternative payment methods). It currently operates in over 200 markets and supports 150 currencies and 680 APMs.
Amid the increasing adoption of digital payments, the company is also launching innovative products, expanding its APM portfolio, venturing into new markets, and making new partnerships, which could boost its financials. The company expects its top line to grow 15-20% annually while expanding its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margins to over 50%. So, its growth prospects look healthy.
The Montreal-based company trades at an attractive valuation, with its NTM (next 12-month) price-to-earnings multiple of 11.9, making it an excellent buy at these levels.
Another mid-cap stock I am bullish on is Lightspeed Commerce (TSX:LSPD), which offers omnichannel solutions to small- and medium-scale businesses. With the growth in e-commerce, the demand for the company’s services is rising. Its Unified Payments initiative has led to a record addition of payment customers with lower-than-expected churn during the September-ending quarter.
The company is witnessing a substantial shift towards higher GTV (gross transaction volumes) customer locations, which could also boost its financials in the coming quarters. Further, the launch of new products and artificial intelligence-powered tools have aided in expanding its customer base and drive its ARPU (average revenue per user). Further, the company has taken several initiatives to improve its profitability, which led it to post its first positive adjusted EBITDA in the September-ending quarter. Given its improving financials, high-growth prospects, and attractive price-to-book multiple of 1.2, Lightspeed Commerce would be an excellent buy at these levels.
goeasy (TSX:GSY), with a market capitalization of $2.6 billion, is my final pick. The Mississauga-based subprime lender has been growing its financials at a healthier rate over the last two decades, delivering superior returns. Despite the strong growth, the company has acquired a small share in the under $45,000 sub-prime credit market. So, it has a substantial scope for expansion.
Meanwhile, the company focuses on new product launches, adding new delivery channels, and strengthening its auto financing segment to boost its financials. It has undertaken several initiatives to lower its risks, such as enhanced underwriting and income verification processes, tightened credit tolerance, and adopted next-generation credit models.
Further, the company’s management expects its loan portfolio to reach $5.1 billion by the end of 2025, a 49% increase from its current levels. Besides, its top line could grow at 18.5% compound annual growth rate. Its operating margins could expand by 1% annually to reach 38% by 2025. So, its growth prospects look healthy. Further, goeasy pays a monthly dividend, with its forward yield currently at 2.48%, and trades at 9.6 times its projected earnings for the next four quarters, making it an attractive buy.