Growth stocks can grow their financials above the industry average, thus delivering oversized returns in the long term. However, investors should be careful when picking stocks, as not all stocks can provide higher returns. Meanwhile, here are my three top picks that have the potential to deliver multi-fold returns over the next 10 years.
WELL Health Technologies
WELL Health Technologies (TSX:WELL) is a tech-enabled healthcare company that could benefit from increased digitization of clinical procedures and the growing popularity of virtual healthcare services. Besides, the company is investing in artificial intelligence to develop innovative products to aid healthcare professionals in early disease diagnosis and preventative health. Further, it has also expanded its footprint by signing an agreement to acquire 10 primary care medical clinics in Ontario and British Columbia.
However, WELL Health has been under pressure over the last few months amid a decline in its net income in the recently reported fourth-quarter earnings. Meanwhile, the company has implemented a cost-optimization program that could improve its operational efficiency and drive profitability. So, amid the favourable environment and its growth and cost-cutting initiatives, the company’s financials could grow in the coming years. Its valuation looks cheap, with the company trading 12.9 times projected earnings for the next four quarters.
Considering all these factors, I believe WELL Health will deliver multi-fold returns over the next 10 years.
Lightspeed Commerce
Lightspeed Commerce (TSX:LSPD) is another growth stock that offers multi-year growth potential amid increased adoption of an omnichannel selling business model. The company unifies the physical and online operations of enterprises and aids in scaling their businesses. It offers financial solutions. Launching its Unified Payments initiative has resonated well with its customers, with the GPV (gross payment value) growth as a percentage of its GTV (gross transaction value). Also, the growing customer base, expanding ARPU (average revenue per user), and increased transition towards higher GTV locations could continue to drive its top line.
Further, Lightpseed’s management focuses on improving its profitability and has undertaken reorganization and cost-reduction initiatives. It has cut 10% of its workforce and has integrated its recent acquisitions into two flagship products, which could improve its operating efficiency. Given these growth prospects and an attractive NTM price-to-sales multiple of two, I believe Lightspeed will deliver superior returns in the long run.
goeasy
goeasy (TSX:GSY) offers leasing and lending services to subprime customers. Its revenue and adjusted earnings per share have grown in double digits for the previous 20 years. Despite the impressive growth, the company has acquired just 2% of the $218 billion non-prime credit market. So, its scope for expansion looks healthy. Meanwhile, the company is strengthening its digital infrastructure, launching new products, and adding new delivery channels to expand its footprint.
Besides, goeasy’s enhanced underwriting and income verification process and adoption of next-gen credit models have reduced its risks. Given these initiatives, I expect the uptrend in the company’s financials to continue. Meanwhile, goeasy’s management expects its loan portfolio to grow by 65% over the next three years to reach $6 billion by 2026. Expanding its loan portfolio could drive its revenue at a compound annual growth rate of 12.9%, while its operating margin could increase from 38.1% in 2023 to 41% in 2026. The company also pays quarterly dividends, with its forward yield at 2.59%.
Considering all these factors, I am bullish on goeasy.
