Are you on the hunt for growth stocks that could potentially create substantial wealth over time? Two Canadian powerhouses, Hammond Power Solutions (TSX:HPS.A) stock and Stantec (TSX:STN) stock, have historically created new millionaires; they have shown impressive growth lately and may have the potential to continue their upward trajectory.
Hammond Power Solutions: An electrifying growth stock
Hammond Power Solutions, a global manufacturer of electrical transformers and related products, has been on an absolute tear. With a market cap of $1.6 billion, this Canadian growth stock has turned heads by transforming a $100,000 investment into nearly $2 million in just five years — that’s a staggering 1,800% return!
Returns on Hammond Power stock have been so good that its major individual shareholder, William G. Hammond, sold a large stock block worth $65.5 million in September for personal wealth planning purposes, including charitable giving.
What’s driving this phenomenal growth? For starters, Hammond Power has been expanding its market share in North America and winning new customers. The company caught the artificial intelligence (AI) growth wave as companies invested in new and expanded data centres. “Market growth was higher than expected in custom transformers, particularly in the data center markets and other emerging sectors,” Hammond Power’s chief executive officer (CEO) recently remarked during a second-quarter earnings call.
The company has reported record quarterly results for six consecutive quarters, with all-time high shipments. Factories are running full throttle, and to meet the growing global demand, Hammond even opened a new factory in Mexico this year.
The numbers speak for themselves. During the second quarter, Hammond Power Solutions stock saw a 14% year-over-year revenue growth and impressive adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) margin of 16.5%. And the future looks bright, with double-digit earnings growth rates projected for the coming year.
While there are some near-term capacity constraints, new capacity additions planned for 2025 could unlock even more revenue growth. At a forward price-to-earnings (P/E) multiple of 19.2, which is below the industry average of 32.9, Hammond Power Solutions stock still looks reasonably valued despite its 67.3% total return so far this year.
Stantec stock: Building a bright future
Stantec, a $12.4 billion engineering and consulting powerhouse, has been another stellar performer. Over the past five years, the company has grown its earnings per share at a compound annual growth rate of 39.4%, rewarding Stantec stock investors with a total return of 297%.
What’s Stantec’s secret? A combination of organic growth and smart acquisitions. The company has been consolidating a fragmented industry, and its growth strategy has proven accretive to earnings, resulting in cost savings and stronger margins.
Recent results are impressive, with record quarterly revenue of $1.5 billion in the second quarter (Q2) of 2024, up 16.8% year over year. Moreover, Stantec’s revenue backlog has grown to $7.2 billion, representing a full year of revenue.
Looking ahead, analysts expect Stantec to grow revenue by 9.4% and increase earnings by 16.2% in 2025. New acquisitions could amplify the growth numbers. With a strong balance sheet and robust free cash flow, the company is well-positioned to continue its acquisition-led growth strategy.
While Stantec stock’s P/E ratio of 35.7 might seem high compared to the industry average of 18.5, remember that high-quality growth stocks often command premium prices. Analysts see potential upside, with an average price target of $ implying nearly 16% growth over the next 12 months.
Investor takeaway
Both Hammond Power Solutions and Stantec are growth stocks offering exciting prospects for long-term-oriented investors. These Canadian companies have demonstrated their ability to grow consistently and create value for shareholders. While past performance doesn’t guarantee future results, the strong fundamentals and growth trajectories of these companies make them worth considering for investors looking to potentially generate significant wealth over time.
