After a solid first quarter, the Canadian equity markets have turned volatile amid growing geopolitical tensions and concerns over a global slowdown due to a prolonged high-interest rate environment. However, investors with longer horizons should ignore these short-term volatilities to earn superior returns in the long run. Given their impressive multi-year growth prospects, the following two stocks offer excellent buying opportunities for long-term investors.
goeasy
goeasy (TSX:GSY) is a subprime lender and leasing services company that has grown its revenue and adjusted net income at an annualized rate of 17% and 30.9%, respectively, since 2011. Supported by these solid financials, the company has delivered above 2,800% returns over the last 13 years at an annualized rate of 29.6%. Despite solid performance over these years, the company’s market share in the Canadian subprime credit market remains smaller. So, it has considerable scope for expansion.
Meanwhile, the lender witnessed solid loan originations of $2.7 billion during 2023, thus expanding its loan portfolio to $3.7 billion. Besides, its stable credit and payment performance lowered its net charge-off rate by 20 basis points to 8.9%. The provisions for future credit losses declined from 7.6% in 2022 to 7.3%. Its efficiency ratio, which measures the company’s ability to control its overhead costs, fell by 340 basis points to 33.6%.
Further, goeasy is expanding its product offerings, adding new delivery channels, and strengthening its digital infrastructure. These strategic initiatives could boost its financials in the coming years. In fact, the company’s management expects its loan portfolio to grow by 65% from its 2023 levels to reach $6 billion by 2026. This loan portfolio expansion could drive its top line at an annualized rate of 12.9%, while its operating margin could expand from 38.1% to 41% in 2026, thus offering an optimistic outlook.
GSY stock is also a Canadian Dividend Aristocrat, which has raised its dividends over the last 10 years. Its forward yield stands at 2.69%, while the stock trades at an attractive NTM (next 12 months) price-to-earnings multiple of 10.3. Considering all these factors, I believe goeasy would be a worthwhile buy for long-term investors.
Docebo
Another growth stock I am bullish about is Docebo (TSX:DCBO), which offers an end-to-end learning platform to enterprises worldwide. Thanks to its highly configurable and personalized learning platform, the company has expanded its customer base from 900 in 2016 to 3,759 in 2023. During the same period, its ARPU (average revenue per user) has more than quadrupled to $52,000.
Besides, the company acquired PeerBoard and Edugo last year. The acquisition of PeerBoard enhanced its external training offerings, while Edugo’s acquisition enhanced its existing AI (artificial intelligence) capabilities. With the demand for learning management systems rising amid digitization, the learning solutions platform is well-positioned to benefit from the expansion. Further, most of its clients have signed multi-year agreements, stabilizing its financials. Amid the topline growth, the company’s profitability has been improving from a loss of $2.2 million in 2019 to profits of $16.3 million in 2023.
Given the expanding addressable market, growth initiatives, and improving profitability, I believe Docebo is an enticing long-term bet despite its expensive valuation.
