Certain growth stocks have had a really good run in recent years. Others have fizzled out as the economy has gotten increasingly uncertain and as investors have gotten increasingly nervous. This has made them attractive stocks to buy.
In this article, I will explore two growth stocks that are pretty cheap when we consider their long-term potential.
Well Health Technologies: A long-term growth stock
The first growth stock to buy is Well Health Technologies (TSX:WELL). Well Health is a technology stock that’s focused on digitizing healthcare systems. In Canada, the company is seeing strong growth and demand from its primary care business. This is because doctors benefit immensely from Well Health’s technology in the form of increased efficiencies, better patient record management, and, ultimately, better patient care.
In the company’s latest quarter, revenue of $231 million hit another record. This was driven by strength in both Canada and the U.S., with 31% and 55% respective growth rates, respectively. The growth has been better than expected and sets the company up well to achieve its long-stated goal of hitting $1 billion in revenue next year.
At this time, bottom-line results remain quite uncertain. The business is in the early stages, so this brings uncertainty. But there are a few things that give me confidence in this company. First of all, the very business is one that is solving a problem that desperately needs to be solved. Healthcare systems are really stuck in the past. The transformation that Well Health’s Technology offers is game-changing. And this has been reflected in the demand that the company has been experiencing.
Cineplex
Cineplex Inc. (TSX:CGX) stock might not be your typical growth stock, but at this time, I feel like there’s a lot of growth heading its way. And I know that it’s extremely cheap.
Cineplex is Canada’s leading movie exhibition and entertainment company. As we all know, this company was hit hard during the pandemic as well as by the writers’ strike. But things have been turning around lately. This is evidenced by the numbers that Cineplex has been posting, which remind me of growth stock numbers.
For example, Cineplex’s fourth quarter of 2023 was the best in its history. In 2023, revenue increased 26%, its earnings before interest, taxes, depreciation, and amortization (EBITDA) tripled, and its EBITDA margin increased to 11.3% from 4.9%. While the 11.3% margin remains below pre-pandemic margin of 14%, it is fast approaching.
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Also, box office revenue per patron, or bpp, and concession revenues per patron hit record highs. This is due to Cineplex’s premium experiences, such as VIP and IMAX theatre, which now account for 40% of box office revenue. They are the higher price level options for movie goers and carry higher margins for Cineplex.
Lastly, Cineplex is improving its balance sheet, and this, coupled with continued revenue and earnings growth, will pave the way for the return of the dividend. Recall that before the pandemic, Cineplex was touted as an ideal, reliable dividend payor because of its steady, reliable cash flows generated. If and when Cineplex can achieve 75-80% of pre-pandemic attendance levels, this would make the reintroduction of the dividend not only possible but very likely. Management expects this will happen late this year or early next year.
In closing, Cineplex stock is highly undervalued, and it’s trading at a mere nine times 2025 consensus earnings, making it an attractive stock to buy.
