2 Red-Hot Growth Stocks to Buy in 2024 and Beyond

Here are two top Canadian growth stocks long-term investors may want to consider on any major dips moving forward, given their upside.

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One of the premier advantages of investing in growth stocks is that these companies have enormous upside for those seeking capital appreciation. Dividends are nice, but many top growth stocks have shown the ability to outperform over very long periods of time. Accordingly, for those looking to add some risk to their portfolio for the next decade or two, finding the top growth stocks with long-term catalysts that can support short-term momentum is important.

The two stocks I’ve listed below each have shown red-hot returns in the past. However, these are companies I think have the ability to keep the ball rolling in the years to come.

Here’s why these two Canadian tech stocks are worth a look right now.

Constellation Software

Constellation Software (TSX:CSU) operates, develops, and customizes software for both private and public sector markets. It is a Canada-based company that acquires, manages and builds vertical-specific businesses. Over a multi-decade window, Constellation has consolidated the industry, acquiring dozens of companies spanning a wide range of industries, with the potential to continue growing in this fashion.

Investors seeking growth have certainly benefited from owning Constellation, historically speaking. In fact, over the past year, this stock has outperformed the market with a 20% rise. In its most recent quarter, Constellation Software reported revenue growth of 34%, vastly beating the broader market. Additionally, from a cash flow growth perspective, this stock remains a behemoth investors continue to pile into for this reason.

Now, Constellation’s valuation is far from cheap, with the stock trading at 110 times earnings. But at its current growth rate, a price-to-earnings-to-growth ratio of around three times isn’t farfetched, and the company’s forward multiples looking just a couple of years out seem reasonable.

For those seeking a top- and bottom-line software growth stock, Constellation is worth considering. Right now, this company remains atop my growth stock watchlist, and I’m waiting for a pullback before pulling the trigger. Unfortunately, I’ve been waiting for some time — this stock has proven to be a gem worth buying at any price, at least based on its history.

Shopify

Shopify (TSX:SHOP) is one of the leading e-commerce platforms designed for small- and medium-scale business entities. It has two segments: subscription solutions and merchant solutions. 

Driven by strong secular trends in the e-commerce sector, Shopify’s recent results point to the kind of growth investors have come to expect with the juggernaut. While growth did slow coming out of the pandemic (largely due to very high comps), Shopify has returned to a more normalized growth rate. This past quarter, the company reported $1.7 billion in revenue, up 31% year over year. Additionally, the company’s total gross merchandise volume increased a whopping 52%, suggesting there’s plenty of room for growth within the Shopify ecosystem.

Currently, Shopify’s North American penetration rate sits at around 15% of all e-commerce sales. If this number continues to tick up, Shopify could continue to grow for a long period of time. As a percentage of overall retail sales, this number ticks down to only 2% in North America and 0.5% globally. Thus, there’s a long runway here for those who believe in the stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.

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