After a subdued performance last month, the Canadian equity markets have started this month on a solid note, with the S&P TSX Composite Index rising 0.5%. The United States Federal Reserve’s indication of no rate hikes despite the lack of progress in bringing inflation down and solid wage numbers appears to have improved investors’ sentiments. Amid rising investors’ confidence, you can buy the following three top growth stocks, which are trading at discounted prices.
WELL Health Technologies
WELL Health Technologies (TSX: WELL) is a tech-enabled healthcare company that has been under pressure over the last few months amid lower-than-expected net income. It has lost around 40% of its stock value compared to its 52-week high and trades at an attractive NTM (next-12-month) price-to-earnings multiple of 13.2. Meanwhile, the correction offers an excellent entry point for long-term investors, given its high-growth prospects and cost-cutting initiatives.
The digitization of clinical procedures and increased adoption of virtual healthcare services have created a multi-year growth potential for WELL Health. Further, the company continues to expand its footprint by acquiring 10 primary care medical clinics in Ontario and British Columbia. It is also developing innovative artificial intelligence (AI)-powered products and services and making strategic partnerships that could help expand its market share. Yesterday, the company launched its second-gen WELL AI Decision Support, which features advanced chronic disease screening tools and delivers actionable clinical insights.
Further, WELL Health has adopted a cost-optimization program that could drive its operational efficiency and profitability in the coming quarters. Considering all these factors, I believe it would be an excellent buy right now.
Lightspeed Commerce
Lightspeed Commerce (TSX: LSPD) is another growth stock that has been under pressure over the last few months due to management’s cautious outlook and uncertain broader economic outlook. It has lost 36.7% of its stock value compared to its 52-week high. However, the company’s long-term growth prospects look healthy amid the increased adoption of the omnichannel selling model.
Meanwhile, the company recently launched several products that could help its customers better access their data, predict demand, and deliver a seamless experience. Also, its Unified Payments initiative has expanded its GPV (gross payment value) as a percentage of its GTV (gross transaction value). Further, the expanding customer base, growing ARPU (average revenue per user), and shifting customers towards higher GTV locations could continue to drive its top line.
Along with top-line growth, Lightspeed also focuses on improving its profitability. So, it has undertaken reorganization and cost-reduction initiatives, including slashing 10% of its workforce and integrating its recent acquisitions into two flagship products. These initiatives could improve its operating efficiency, thus driving its profitability.
Magna International
Magna International (TSX: MG) is an automotive parts supplier with 342 manufacturing operations and 104 product development centres across 28 countries. The company has been under pressure as lower vehicle production amid chip shortages and UAW (United Auto Workers) labour strikes have impacted its financials. Compared to its 52-week high, the company has lost 24% of its stock value. Amid the selloff, the auto parts manufacturer trades at an attractive NTM price-to-earnings multiple of 8.1.
Meanwhile, Magna International is expanding its presence in megatrend areas and plans to invest around $1.2 billion in powertrain electrification, battery enclosures, and active safety segments. Amid growing demand and continued investments, the company’s management expects the megatrend segment to grow at an annualized rate of 40%. The management hopes that the segment will turn profitable by 2026.
For the next three years, Magna International’s management expects its topline to grow at a compound annual growth rate of 5.3%. Its adjusted earnings before interest and tax margin could expand to 7-7.7% by 2026 compared to 5.22% in 2023. Considering its healthy growth prospects and cheaper valuation, I believe Magna International will deliver oversized returns in the long run.
