Growth stocks are those companies that have the potential to grow their financials above the industry average, thus delivering superior returns in the long run. Enticed by the expectation of oversized returns, investors are ready to pay a premium, driving their valuation higher. If these companies fail to meet expectations, they could witness substantial selling, making them risky. So, these companies are ideal for investors with higher risk tolerances. Meanwhile, here are my four top picks.
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Celestica
Amid the growing adoption of artificial intelligence in various sectors, the demand for high-speed compute switches is rising, thus expanding the addressable market for Celestica (TSX: CLS). Meanwhile, the company continues to expand its product offering to meet the growing demand. Last month, it launched four new networking switches that could meet modern businesses’ performance and connectivity demands. Besides, the company is working on acquiring NCS Global Services, which could strengthen its position in the IT infrastructure and asset management business.
Looking forward, Celestica’s management expects its 2024 revenue to be between $2.2 billion and $2.3 billion, with the midpoint representing a 14.3% increase from the previous year. Besides, its operating margin could expand from 5.6% in the last year to 6.1%. Further, management projects its adjusted EPS (earnings per share) to grow by 35.8% while generating adjusted free cash flows of $250 million. Despite its healthy growth prospects, the company trades at 16.7 times analysts’ projected earnings for the next four quarters, making it an excellent buy.
goeasy
goeasy (TSX: GSY) is another top growth stock you can add to your portfolio. Despite the challenging environment, the company continues to witness stable credit and payment performance. Its net charge-off rate stands at 9.1%, within its guidance of 8.5% to 9.5%. Supported by its expansion and diversified lending model, the company has raised its loan portfolio to over $4 billion.
Further, goeasy’s management is confident of closing this year with a loan portfolio of over $4.6 billion and forecast to reach $6 billion by 2026. With inflation showing signs of easing, the central bank could continue with its monetary easing initiatives, which could boost economic activities, thus driving credit demand. The loan portfolio expansion could continue to drive goeasy’s top and bottom lines. Besides, its consistent dividend growth and an NTM (next 12 months) price-to-earnings multiple of 10.8 make it an ideal buy.
WELL Health Technologies
Clinics are digitizing patients’ records and adopting administrative tools to streamline their operations. This transition and patients’ adoption of virtual healthcare services have created a multi-year growth potential for WELL Health Technologies (TSX: WELL). Meanwhile, the company is investing in artificial intelligence to develop innovative products that could strengthen its market share.
In the March-ending quarter, WELL Health had 1.3 million patient visits at an annualized rate of 5.2 million. Given its growth initiatives, these numbers could continue to increase in the coming quarters. Looking forward, the company’s management projects its 2024 revenue to be between $960 million and $980 million, with the midpoint representing a 25% increase from the previous year. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) could grow by 12.4%. Given its healthy growth prospects and a cheaper NTM price-to-earnings multiple of 14.8, I am bullish on WELL Health.
Lightspeed Commerce
My final pick would be Lightspeed Commerce (TSX: LSPD), which reported an impressive fiscal 2024 performance last month. Its top line grew by 24.5%, while its net losses declined from $1.1 billion to $164 million. However, after removing special items, its adjusted net income stood at $24.5 million compared to a loss of $25.1 million in the previous fiscal year. It also registered a positive adjusted EBITDA for the first time.
Meanwhile, the growing adoption of omnichannel selling has created multi-year growth potential for Lightspeed Commerce. Besides, its unified POS and payments platform has resonated with its customers, expanding its customer base and average revenue per user. The company’s management projects its revenue to grow by 20% in fiscal 2025, while its adjusted EBITDA could increase to $40 million. Despite its healthy growth prospects, the company trades at 0.9 times its book value.
