Growth stocks in Canada have been enjoying very strong gains in 2024. Somehow the stock market is shrugging off worries from 2023. Growth stocks are once again getting a bid this year.
Do you have some cash to invest? Here are three Canadian growth stocks that could have strong runs in 2024 and even beyond.
A top financial stock
goeasy (TSX: GSY) has been one of the top stocks on the TSX over the past 10 years. It is up 950%. Add in that dividends are reinvested, and shareholders have earned a 1,247% total return! That equates to a 29.7% compounded annual growth rate (CAGR).
goeasy started out as a furniture/appliance leasing business. It still runs that business, but non-prime lending makes up the main part of its revenues today.
Non-prime loans tend to be risky because their customers tend to have poor credit quality. goeasy compensates for the risk by geographically balancing its loan mix, diversifying its product categories, prudent underwriting, and elevated loan interest rates.
Most major Canadian banks have pulled out of this segment. As a result, goeasy has been able to take considerable market share. It has grown revenues and earnings per share by respective CAGRs of 16.6% and 32% over the past five years.
Despite its strong business, this stock trades for only 13 times earnings. It pays a 2.4% dividend yield, so it has some income benefits as well.
A fast-growing insurance business
If you are looking for a growth stock that is under the radar, Trisura Group (TSX: TSU) should be on your list. It provides specialty insurance solutions in Canada. It complements this with a fast-growing insurance fronting business (when a licensed insurer underwrites a policy, but cedes most or all the risk to a reinsurer) in the U.S.
With a market cap of $1.8 billion, Trisura is one of the smallest insurers in Canada. However, it has delivered exceptional growth. Its stock is up 660% over the past 6.5 years (a 35% CAGR). In that time, total revenues and earnings per share have risen by 500%.
It had a rough year in 2023 due to a one-off write-down event. Fortunately, management has rightsized the ship. 2024 should be clean for a strong recovery in earnings growth.
Right now, Trisura trades at a meaningful discount to many of its insurance peers in the United States. As a result, it could benefit from a recovery trade in 2024.
A top Canadian software stock … in Europe
Unlike the other two stocks, Topicus.com (TSXV: TOI) is not a cheap stock. This $8.5 billion technology company trades with a price-to-free cash flow ratio of 26.
Despite its reasonable size, not many Canadians know about this stock. Why? Well, it operates completely in Europe. It was spun out of Constellation Software a couple of years ago as a pure-play way to invest in vertical market software businesses in Europe.
The company is mirroring Constellation’s roll-up strategy. Yet, it is only one-tenth the size of Constellation today. It is actually growing organic revenues faster than Constellation.
I would probably wait for some sort of pullback in the stock price. Those come rarely, but it may be worthwhile to be patient. If this company can perform even half as well as Constellation, it could be an excellent growth stock to hold for the long term.
