4 Top Canadian Growth Stocks to Buy in May 2021

Certain Canadian growth stocks look very promising right now. Here are four top Canadian growth stocks that look attractive in May 2021.

It has been a choppy year for Canadian growth stocks. Worries about high valuations, interest rates, rising bond yields, and inflation have caused many Canadian growth stock to pull back in recent months.

Yet I encourage investors to look at the reasons why such growth stocks are highly valued. Often, they have massive societal tailwinds pushing growth, are well financed, have great management teams, and are, in essence, “doing all the right things.”

Sure, I am concerned about valuations. However, in a very low interest rate environment, they are not all dramatically overpriced. If you have a long-term time horizon, why not invest in the best? Considering this, here are four top Canadian growth stocks I find interesting in May 2021.

A Canadian e-commerce and payments leader

If you followed Shopify’s strong quarterly beat last week, it’s not hard to imagine that Lightspeed POS (TSX:LSPD)(NYSE:LSPD) could also present very strong results. This Canadian stock is quickly becoming a market leader in omni-channel point-of-sales solutions across the world. When the pandemic hit, I thought Lightspeed’s largely retail and restaurant-based merchants would be crushed. However, the opposite has occurred.

Lightspeed has become a life saver for merchants. Its platform enables merchants to operate through multiple sales channels and keep business going through the pandemic. Lightspeed has made some great acquisitions over the past year.

Likewise, it is set to expand service offerings that should be very accretive in 2021. The stock has been growing revenues by over 30% prior to the pandemic. Last year, it grew by over 50%. Combine organic and acquisition growth, and this stock is set for some exciting opportunities in the years to come.

Two Canadian SaaS stocks worth a look for the long term

Constellation Software (TSX:CSU) has just pulled back after hitting an all-time high in early April. I think it presents a decent entry point. Certainly, this stock is not cheap. Yet, given its high-quality track record (a 2,580% total return over the past 10 years), historically any pullback has been a great buying opportunity. Certainly, due to the laws of large numbers, growth might be slower than in the past.

Yet management is getting very creative about compounding capital to accrete strong returns. It just IPO’d a smaller European-focused subsidiary called Topicus.com. As a smaller, up-and-coming Constellation-like business, that stock really has exceptional growth opportunities in Europe. If Topicus proves successful (at least as a stock it has done well so far), Constellation might push out further subsidiary spin-outs in the future.

Likewise, Constellation is now focusing on new market verticals and larger acquisitions. While these may garner lower hurdle rates, the expected rates of return are still exceptional (ROIC of +20%). Consequently, this company still has a lot of running room. With this Canadian stock, you pay up for a great balance sheet, strong recurring revenues, and a high free cash yield. In return, you can expect a compound-growth machine for years ahead.

A new Canadian IPO stock

Telus International (TSX:TIXT)(NYSE:TIXT) is another new growth stock that Canadians ought to have on their radar. After its IPO in February, the stock has come off. Yet lately, the stock has started to show signs of momentum. Considering the great earnings results presented by some of its largest customers like Alphabet, I think TIXT will benefit from similar tailwinds.

TIXT provides digital customer experience services and solutions. The company just acquired a leading business in artificial intelligence and data annotation. This provides an edge in services and also growth opportunities.

Last year alone, TIXT grew revenues by 55%. Yet, unlike many American tech unicorns, it is also very profitable and free cash flow generative. I don’t think the market has fully recognized the quality of its services and operational platform. As a result, this top Canadian growth stock looks attractive today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Robin Brown owns shares of Constellation Software, Lightspeed POS Inc, TELUS International (Cda) Inc., and Topicus.Com Inc. David Gardner owns shares of Alphabet (A shares) and Alphabet (C shares). Tom Gardner owns shares of Alphabet (A shares), Alphabet (C shares), and Shopify. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Constellation Software, Shopify, Shopify, and Topicus.Com Inc. The Motley Fool owns shares of Lightspeed POS Inc.

More on Tech Stocks

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

OpenText stock has fallen in the last few years, but that could mean this top tech stock remains an undervalued…

Read more »

AI microchip
Tech Stocks

Celestica Stock: Buy, Sell, or Hold?

Celestica's stock price has rallied 950% in the last five years. Will the AI boom send it even higher in…

Read more »

data analyze research
Tech Stocks

2 Ridiculously Cheap Growth Stocks to Buy Hand Over Fist in 2024

Well Health Technologies is a cheap growth stock to buy for its record-breaking results, massive revenue growth, and profitability.

Read more »

A worker uses a double monitor computer screen in an office.
Tech Stocks

4 Reasons to Buy Kinaxis Stock Like There’s No Tomorrow

Kinaxis stock has a strong past. But there is even more to look forward to from this top tech stock.

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

The Future of AI: Best Canadian Stocks to Buy Now

Here are two of the best AI-focused stocks in Canada that you can consider adding to your portfolio before it’s…

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Tech Stocks

2 TFSA Stocks to Buy Right Now With $7,000

Are you looking for growth stocks that can help you maximize the tax-free withdrawals of the TFSA? This article is…

Read more »

cloud computing
Tech Stocks

3 No-Brainer Tech Stocks to Buy Right Now for Less Than $1,000

Not all tech stocks are the risky investments that many think they are. Which is why we're focusing on the…

Read more »