Growth stocks aim to grow their financials at a higher rate than the industry average, thus delivering superior returns in the long term. Due to higher returns potential, investors are ready to pay a premium, raising their valuation. Meanwhile, as these companies are in the developing stage, they are highly susceptible to market fluctuations. Also, they won’t pay dividends as they reinvest their earnings to fund their growth initiatives. So, these companies are riskier. Investors with higher risk-taking abilities could buy these stocks to earn superior returns.
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Celestica
Celestica (TSX:CLS), which offers innovative supply chain solutions to a wide range of customers worldwide, is one of the top performers this year, delivering impressive returns of 191%. Its solid performances in the first three quarters, raising of 2024 guidance, and healthy long-term growth potential have driven its stock price. In the first nine months, the company’s top line has grown 43.8% from the previous year, while its diluted EPS (earnings per share) has increased by 85%. The solid performance of the Connectivity & Cloud Solutions (CCS) segment has overcome the weakness in the Advanced Technology Solutions (ATS) segment to drive the company’s financials.
Meanwhile, I expect Celestica’s financial uptrend to continue, given its exposure to the high-growth AI (artificial intelligence) and ML (machine learning) sectors. It has recently entered into a strategic relationship with Groq, which developed the Language Processing Unit specializing in accelerated inferencing. The partnership could strengthen Celestica’s position in manufacturing AI/ML servers and full-rack solutions. Given its diversified customer base, growth initiatives, and an attractive NTM (next 12 months) price-to-sales multiple of 0.9, Celestica would be an excellent long-term buy.
goeasy
goeasy (TSX:GSY) would be another top growth stock to have in your long-term portfolio due to its consistent performance and healthy growth prospects. The subprime lender has grown its revenue at an annualized rate of 20.2% for the last five years, while its diluted EPS has increased at a 28.1% CAGR (compound annual growth rate). Continuing its uptrend, the company has funded loan originations of $1.5 billion in the first two quarters, expanding its loan portfolio to $4.1 billion. Amid the loan portfolio expansion, the top line grew by 25% while its adjusted EPS (earnings per share) rose 24%.
Meanwhile, the Bank of Canada has slashed its benchmark interest rates four times since June. Lower interest rates boost economic activities, driving credit growth. Given its wide range of product offerings and solid distribution channels, goeasy is well-positioned to benefit from credit growth. Besides, the company is also strengthening its digital infrastructure and venturing into new markets, which could boost its financials in the coming years.
The company’s management expects its loan portfolio to grow 50% from its current levels to reach $6.2 billion by the end of 2026. Also, the management expects its revenue to grow at an annualized rate of 14% while its operating margin could improve to 42% from 40.6% in 2023. Amid these healthy growth prospects, I believe goeasy would be an excellent long-term buy.
Docebo
Docebo (TSX:DCBO) offers a highly customizable end-to-end learning platform that allows businesses worldwide to scale and provide personalized learning across their user groups. The company has expanded its customer base from 1,200 in 2017 to 3,898 by the end of the second quarter of 2024, while its average contract value has increased four times to $52,822. Amid these expansions, its top line has increased at an annualized rate of over 50% since 2016. Along with top-line growth, the company’s adjusted EPS has been improving. In the second quarter of 2024, it reported an adjusted EPS of $0.26, representing a year-over-year increase of 85.7%.
Meanwhile, the LMS (learning management system) market is expanding amid improving digital connectivity, development of multimedia graphics, and growth in remote working and learning. Grand View Research projects the LMS market to grow at an annualized rate of 19.7% for the rest of this decade. Given its highly customizable LMS platform, the company is well-positioned to benefit from the expanding addressable market. Besides, it continues to make strategic partnerships and develop innovative AI features that could expand its customer base. Moreover, around 80% of its customers have signed multi-year agreements, stabilizing its financials.
