Growth stocks have the potential to increase their financials above the industry average, thus delivering superior returns in the long run. However, these companies trade at higher valuations as investors are ready to pay premiums on the expectation of higher returns, thus making them riskier. So, investors with higher risk-tolerance abilities and longer investment horizons should invest in these stocks. Here are two top growth stocks that can deliver multi-fold returns over the next 10 years.
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WELL Health Technologies
WELL Health Technologies (TSX: WELL) owns and operates a portfolio of primary clinics and also develops technologies to support healthcare providers in delivering positive patient outcomes. After a tough beginning to this year amid a challenging macro environment, the company has witnessed healthy buying over the last few weeks. Its stock price has increased by over 34% since reporting its first-quarter performance.
During the quarter, the company’s top line grew by 37% driven by organic growth and acquisitions. Meanwhile, its gross margins contracted from 50.9% to 44.1% due to the acquisition of lower-margin businesses. However, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and adjusted EPS (earnings per share) grew by 6% and 33.3%, respectively.
After posting a healthy first-quarter performance, the company’s management has raised its 2024 revenue and adjusted EBITDA guidance. The management now expects its 2024 revenue to come between $960-$980 million, while its adjusted EBITDA could be within $125-$130 million.
Besides, WELL Health’s long-term growth prospects look healthy. Clinics have digitized patient records and are adopting management software applications to streamline operations, thus expanding the company’s addressable market. Meanwhile, WELL Health is investing in artificial intelligence to develop innovative products to strengthen its position. Further, the company could also benefit from the increased adoption of virtual healthcare services.
Despite solid buying over the last few weeks, WELL Health’s valuation looks enticing, with its NTM (next 12 months) price-to-earnings and NTM price-to-sales multiple of 16.5 and 1.2, respectively. Given its long-term growth prospects and cheaper valuation, I expect WELL Health to deliver superior returns in the long run.
Docebo
Amid the digitization of business processes and increased penetration of Internet services, the adoption of learning management systems (LMS) has been rising. Meanwhile, Markets and Markets projects the global LMS market to rise at an annualized rate of 18.6% from 2023 to 2028. Given the growth potential in the LMS space, I have chosen Docebo (TSX: DCBO), which offers a cloud-based learning platform to businesses worldwide, as my second pick.
Supported by its AI-powered platform, Docebo continues to expand its customer base, which increased from 1,200 in 2017 to 3,832 as of March 31. Its average contract value increased four times during the same period. Besides, the company’s multi-year agreements with its customers and a net dollar retention rate of 104% provide stability to its financials. So, Docebo’s long-term growth prospects look healthy.
Meanwhile, Docebo has been under pressure over the last few weeks amid concerns over the challenging macro environment. It has lost over 32% since reporting its first-quarter earnings. However, given its healthy long-term growth prospects, I believe the pullback offers an appealing entry point for investors with longer investment horizons.
