There’s a certain allure to the idea of “millionaire-maker stocks.” These are the high-fliers, the ones that turn modest investments into life-changing wealth. But how do you spot them and what kind of returns can you realistically expect? Two Canadian growth stocks, goeasy (TSX:GSY) and Descartes Systems (TSX:DSG) historically fit the bill. Let’s see why they made early investors rich, and may continue to do so.
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What makes a stock a millionaire maker?
Millionaire-maker stocks aren’t about overnight success. They’re about sustained, exceptional growth over many years. Think returns of 20% to 50% or more, year after year. That kind of compounding can turn a small investment into a million-dollar nest egg.
Take Amazon.com, for example. Early investors who held on saw annual returns of around 33% since its IPO in 1997. Or consider Constellation Software, which delivered a staggering 1,414% return over the past 10 years, at a compound annual return of 31.2% annually. These are the kinds of stocks that can truly transform your financial future.
Spotting potential millionaire makers
While past performance is never a guarantee of future success, there are some common traits among millionaire-maker stocks:
- High-growth sectors: Look for companies in technology, biotechnology, or emerging industries. These sectors often have the potential for explosive growth.
- Strong track record: Consider companies with a history of strong revenue and earnings growth. Double-digit revenue and earnings growth rates are often accompanied by high share price increases.
- Competitive advantage: Seek out companies with a unique product or service, a strong brand, or a loyal customer base.
- Financial health: Look for companies with a solid balance sheet and strong cash flow.
Two Canadian contenders
Now, let’s dive into two TSX growth stocks that have shown the potential to create millionaires:
1. goeasy stock
This alternative consumer credit provider has been on a tear, with its stock producing a compound annual return of 26.7%, including dividends, during the past decade. Investors who bought goeasy stock 10 years ago and reinvested all their quarterly dividends could have turned $100,000 into over $1 million today.
goeasy continues to ride the wave of consumer demand for unsecured loans as it expands its products menu. The company is profitable, growing its market share, and generating double-digit returns on equity. Second-quarter revenue and earnings per share surged by 25% year-over-year, and GSY stock has generated 70% in total returns over the past 12 months.
With a price-to-earnings ratio of 12.2, which is well below the industry average of 24, goeasy stock looks cheap and may still have room to run.
2. Descartes Systems Group
The Descartes Systems Group provides cloud-based logistics and supply chain management solutions to diverse clients in various industries worldwide.
The company’s flagship logistics technology platform, the Global Logistics Network (GLN), is sold under a software-as-a-service model to clients who usually commit to multi-year contracts. It has been a formidable source of recurring revenue, growing profits and highly visible free cash flow – the dry powder management uses to make accretive acquisitions.
Financial analysts estimate that Descartes may grow earnings at a compound annual growth rate of 34.4% over the next five years. Acquisitions may amplify all that.
DSG stock has generated about 24.7% in compound annual returns since January 2014, turning a $100,000 investment into more than $1 million in under 11 years.
With a forward PE of 53.5, DSG stock isn’t cheap. But high-quality growth stocks are usually expensive, especially those with a history of minting millionaires – like Descartes Systems stock.
Investor takeaway
Millionaire-maker stocks do exist. By understanding what to look for and being patient, you can increase your chances of finding those rare gems that can turn your financial dreams into reality.
If you’re feeling overwhelmed or don’t have the time to do extensive research, consider subscribing to a reputable financial newsletter or investment service with teams of analysts who specialize in identifying high-growth stocks with millionaire-making potential. They can provide you with curated investment ideas and save you valuable time and effort.
That said, investing in the stock market always carries risk. Even the most promising companies can stumble. It’s crucial to diversify your portfolio.
