Growth stocks tend to grow their financials above the industry average, thus offering higher return potential. People are ready to pay a premium to own these stocks given their higher return potential, thusly raising their valuations. Though given the developing nature of their business and higher valuations, growth companies are considered riskier. So, investors with higher risk tolerance abilities and longer investment horizons can buy these stocks to earn superior returns.
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Celestica
Celestica (TSX: CLS) has been one of the top performers over the last two years, with returns of over 730%. Its solid financials and exposure to the high-growth artificial intelligence(AI) sector have boosted its stock price. Amid the increased usage of AI, hyperscalers are investing in expanding their AI-ready data centres, which has fueled the demand for switches, high-performance computing platforms, and storage solutions.
Meanwhile, Celestica could benefit from this demand growth, given its innovative product offerings and new launches. In April, the company acquired NCS Global Services, an IT infrastructure and asset management company in the United States. Besides, it recently forged a strategic relationship with Groq, which specializes in accelerated inferencing. Considering all these growth initiatives and a favourable environment, I expect the rally in Celestica’s stock price to continue.
Shopify
Another growth stock I am bullish on would be Shopify (TSX: SHOP), which offers essential internet infrastructure for commerce to businesses worldwide. The company posted an impressive third-quarter performance in October, with its revenue and operating income growing by 26.1% and 132%, respectively. Its operating margin improved from 7.1% to 13.1%. The company also generated free cash flows of $421 million during the quarter, representing 19% of its revenue – a 300 basis points improvement from the previous year’s quarter.
Moreover, the growing transition towards an omnichannel selling model has created long-term growth potential for Shopify. Meanwhile, the company continues to develop innovative products to meet the growing needs of its customers. It also focuses on personalizing the customer experience, which has been gaining traction among mid-market merchants. The increasing adoption of its payments platform and strengthening of its business-to-business (B2B) offerings could also support the company’s growth. So, I expect the uptrend in Shopify’s financials and stock price to continue in the coming years.
WELL Health Technologies
WELL Health Technologies (TSX: WELL) develops technology and services to aid healthcare professionals in delivering positive patient outcomes. The digital healthcare company posted an impressive third-quarter performance last month, with its topline growing by 23%. Solid organic growth and acquisitions in the previous four quarters more than offset the decline from divestments to drive its sales. It had 1.48 million patient visits during the quarter, representing a 31% year-over-year increase. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to WELL shareholders grew 10% to $25.1 million.
Meanwhile, the growing adoption of telehealthcare services, digitization of patient records, and usage of software solutions in healthcare have expanded the addressable market for WELL Health. The company continues to focus on developing innovative products to strengthen its footprint. Besides, it has a solid acquisition pipeline, with 17 letters of intent and definitive agreements. Also, the company’s valuation looks attractive, with its NTM (next 12 months) price-to-sales multiple at 1.5, making it an attractive buy.
