The global equity markets have turned bullish over the last few weeks, with the S&P/TSX Composite Index up 14% for this year. The United States Federal Reserve slashed its benchmark interest rates by 50 basis points, improving investors’ sentiments and driving equity markets. So, in this bullish market, investors can go long on the following three quality growth stocks to earn oversized returns.
Docebo
Docebo (TSX:DCBO) offers businesses a highly customizable learning management platform, helping them deliver personalized learning to their customers. Amid digitization and growth in remote working and learning, the adoption of LMS (learning management system) is rising, thus expanding Docebo’s addressable market.
Meanwhile, the company uses AI (artificial intelligence) effectively to enhance customer experience and distinguish itself from its competitors. Its expanding customer base and growing average contract value could continue to drive its financials in the coming quarters. Also, its growing annual recurring revenue and multi-year agreements with its customers stabilize its financials. The company’s profitability is improving, with its adjusted EPS (earnings per share) growing by 86% in the June-ending quarter.
Meanwhile, Docebo currently trades at a 21% discount compared to its 52-week high, thus offering an excellent entry point for long-term investors.
Savaria
Savaria (TSX:SIS) offers accessibility solutions to elderly and physically challenged people worldwide. The company has reported a solid performance in the first six months, with its top line growing by 5.1% despite the divestment of its Norway operations. Organic growth and favourable currency translation boosted its sales. The company’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by 26.7%, while its adjusted EBITDA margin expanded by 300 basis points to 17.8%.
Further, the company generated $50.1 million of cash from its operations, which it utilized to make capital investments, acquisitions, repay debt, and pay dividends. Its financial position looks healthy, with its net debt-to-adjusted EBITDA ratio at 1.88. Meanwhile, the demand for accessibility solutions is rising amid a growing aging population and rising income levels. Further, the company is developing innovative products and strengthening its production capabilities. It has also adopted a multi-year Savaria One initiative, boosting its production and throughput while improving its procurement and supply chain efficiencies.
Further, Savaria recently raised its monthly dividend by 3.85% to $0.045/share, with its forward yield at 2.42%. Its NTM (next-12-month) price-to-earnings multiple stands at 20, making it an attractive buy.
goeasy
goeasy (TSX:GSY) is a subprime lender that has grown its loan portfolio at a 35% CAGR (compound annual growth rate) for the previous five years. Meanwhile, its revenue and diluted EPS (earnings per share) have increased at an annualized rate of 20.2% and 28.1%, respectively. Supported by these solid financials, the company has returned around 250% in the last five years at an annualized rate of 28.5%.
Meanwhile, I expect the uptrend to continue. Economic activities could increase, with the Bank of Canada cutting interest rates three times this year, thus driving credit demand. Further, goeasy is expanding its product offerings, strengthening its digital infrastructure, developing new distribution channels, and venturing into new markets, which could increase loan originations and expand its loan portfolio. The company’s management expects its loan portfolio to reach $6.2 billion by the end of 2026, representing a 50% increase from its current levels.
Further, goeasy has adopted enhanced underwriting and income verification processes and tightened underwriting requirements, which could lower defaults and boost its profitability. Moreover, the company has been growing its dividends at a 30% CAGR for the previous 10 years and currently offers a forward dividend yield of 2.63%. Considering all these factors, I am bullish on goeasy.
