The smartest growth stocks are not necessarily the ones that are growing the fastest. Rather, the smartest stocks are those that can sustain steady and predictable profit and cash flow growth over long periods of time.
Companies that sustain steady growth also tend to capture a higher valuation multiple over time. If you hold on long enough, you can benefit from the double play of a rising valuation and earnings-per-share growth. If you are looking for some smart growth stocks, here are four to look at right now.
A growing real estate stock
Colliers International Group (TSX: CIGI) stock has delivered a 471% total return over the past 10 years. That is a 19% compounded annual growth rate (CAGR).
Colliers operates a diversified commercial real estate services business. It is best known for its global commercial brokerage.
However, many don’t realize that nearly half of its income comes from stable outsourcing/advisory services (engineering, design, consulting, and property management). Another third comes from recurring asset management income.
Colliers has traded sideways the past few years due to a weak real estate transaction market. That is set to reverse as interest rates start to pull back. That could be a very good catalyst for this stock moving forward.
A European tech stock
Another solid Canadian growth stock is Topicus.com (TSXV: TOI). Not many Canadian investors are familiar with this stock because it operates solely in Europe.
It is a spin-out from Constellation Software (one of Canada’s best-performing growth stocks). It is replicating a similar strategy of consolidating niche software companies. Interestingly, its organic growth has consistently been higher than Constellation’s growth.
Given Europe’s diverse mix of countries, markets, industries, languages, and governments/regulations, Topicus has a large market to potentially acquire.
With interest rates coming down, Topicus can tactically use its strong balance sheet to make more acquisitions. If you want to buy a similar stock to Constellation that in its early stages of growth, this tech stock is a great addition today.
A rapidly growing financial stock
Another top Canadian growth stock is goeasy (TSX: GSY). It is the largest non-prime lenders in Canada. Recently, big Canadian banks have tightened lending policy. As a result, more and more consumers are coming to goeasy for non-prime loan services.
goeasy has a nationwide retail network. It continues to expand its lending services and has a credit card product in the works. That could significantly expand its total addressable market.
goeasy’s stock recently declined. Its stock is yielding 2.5% and trading for 12 times earnings (despite growing at nearly double that rate). It is an attractive buy if you can look through the near-term stock weakness.
A small-cap stock with big growth potential
A final growth stock you don’t want to ignore is VitalHub (TSX: VHI). This is the small-cap stock choice on the list. It has a market cap of $350 million. It is small, so it is more volatile. However, take a long approach and this investment could pay off.
VitalHub offers a wide range of planning and organization software for hospitals, clinics, and the healthcare sector. The sector still has many manual staffing operations that VitalHub can help streamline. Its products help save time and money and improve patient outcomes.
The company has a strong balance sheet that it can use to invest in other health-tech businesses. Likewise, as it scales, it becomes more profitable and cash-generative. This growth stock has a long runway ahead. There will be ups and downs, but the ups should more than make up for the latter.
