For those looking to build a diversified investment portfolio, investing in growth stocks can build a strong future. Of course, finding the right picks that meet an individual investor’s risk profile is important. Not every stock provides both the stability and total return expectations investors have.
The following two stocks are among the best Canada has to offer in this regard, in my view. These companies possess the ability to grow but do so sustainably over the long term.
Let’s dive into why these growth stocks may be a perfect fit for many investor portfolios moving forward.
Constellation Software
Constellation Software (TSX: CSU) provides enterprise and software to diversified industries. Its specialized and crucial solutions enable clients to improve productivity, sales, cost-effectiveness, customer satisfaction, and service. The company serves clients in several diverse sectors, such as biosciences, communications, financial services, education, utilities, marine, retail, etc. Notably, Constellation Software also offers services to public and private sectors globally, having a strong presence in Asia, America, Europe, and Africa.
In the first quarter of 2024, Constellation Software reported revenue of US$2.4 billion and net cash flows from operating activities of US$737 million. The company’s income tax expense for the period came in at US$52 million, and the free cash flow available to shareholders was US$466 million. In addition, the company’s net cash flow from operating activities per share was US$34.76, and the free cash flow available to shareholders per share was US$21.04 for the quarter.
Those are some impressive fundamentals for investors to consider. And while this stock has surged nearly four-fold over the past five years, Constellation Software appears to hold significant value for long-term investors seeking outsized returns due to its consistency and ability to consolidate a fragmented software sector.
So long as smaller tech companies pop up and are willing to be acquired, Constellation’s growth profile isn’t likely to slow. This is a top TSX growth stock that’s positioned well for future growth, with the fundamentals to back up its previous performance. That’s something I like.
WELL Health Technologies
WELL Health Technologies (TSX: WELL) is the operator and owner of Primary Hclinics, delivering healthcare-related services. The company operates in the following segments: clinical operations and allied health, billing and revenue cycle management solutions, and electronic medical records, among other business units.
In the first quarter of 2024, WELL Health reported revenue of $231.5 million and operating income of $8.85 million. The company’s interest income was $238,000, and its net income before income tax was $19.4 million for the period. In addition, WELL’s profit margin increased by 6.5% year over year, recovering from the net loss in the first quarter of 2023. The company’s earnings per share increased from a loss of $0.06 the prior quarter to a gain of $0.06 this quarter, suggesting the company has made the right moves to generate profitability — what many investors wanted to see.
The global telehealth sector is expanding rapidly, and investors are clearly finding it possible to generate impressive returns by investing in this sector. Over the past five years, WELL stock is up nearly 200% despite being down roughly 50% from its pandemic peak. It depends on how you look at this company. But in most respects, there’s more to like than not with the secular growth tailwinds at the company’s back.
The company’s recent strategic partnerships and continued acquisitions enhance its top-line growth profile moving forward. For those looking to take advantage of a Canadian stock with real and material tailwinds, this is a top option I think is worth considering right now.
