Growth stocks can potentially grow their financials above the industry average, thus delivering superior returns in the long run. However, these companies require higher capital to fund their growth. They usually reinvest their profits and hence don’t pay dividends. So, growth companies are considered riskier.
Having discussed the features of growth stocks, here are my two top picks you can buy and hold for the next 10 years to reap superior returns.
Nuvei
Nuvei (TSX:NVEI) offers a highly flexible and scalable technology that facilitates businesses transacting through digital tools, including next-gen payments. It operates in 200 markets and supports 150 currencies and 680 alternative payment methods (APM). Meanwhile, the growth in the omnichannel selling model has made digital payments popular, thus creating multi-year growth potential for the company.
The Montreal-based fintech company is focusing on developing innovative products, expanding its APM portfolio, making strategic partnerships, and expanding geographically to drive growth. Besides, it has adopted a disciplined cost management structure and is focused on improving its efficiency to drive profitability. In the September-ending quarter, the company’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin stood at 36.3%.
Given its growth initiatives, Nuvei expects its revenue to grow at an annualized rate of 15 to 20% in the medium term. It also hopes to improve its adjusted EBITDA margin to over 50% in the long term. So, its business outlook looks healthy. Despite its solid growth prospects, the company trades at a cheaper valuation, with its NTM (next 12 months) price-to-earnings multiple at 13.1, making it an excellent buy at these levels.
WELL Health Technologies
WELL Health Technologies (TSX:WELL) focuses on developing technology and services that aid healthcare professionals in enhancing the patient experience. The company has been under pressure over the last few months following an increase in its third-quarter net losses. It has lost over 30% of its stock value compared to its 52-week high. Besides, the steep corrections have dragged its NTM price-to-sales and NTM price-to-earnings multiples to 1.1 and 14.9, respectively.
Meanwhile, the growth in the adoption of virtual healthcare services and digitization of clinical procedures have expanded WELL Health’s addressable market. Amid the expanding addressable market, the company is also developing new innovative products and enhancing its product offerings with new artificial intelligence-powered tools, which could strengthen its position. Further, the tech-enabled healthcare company is expanding its footprint and working on acquiring 13 clinics through absorption and 30 clinics through acquisitions.
In the December-ending quarter, WELL Health reported a record 1.2 million patient visits and 1.9 million patient interactions. Both parameters represent 18% quarter-over-quarter growth amid solid organic growth and contributions from acquisitions in Canada and the United States. Boosted by strong operating performance, the management hopes to post positive EPS (earnings per share) during the quarter. So, given its long-term growth prospects, improving financials, and attractive valuation, I am bullish on WELL Health.
Further, the Vancouver-based company has taken several initiatives to streamline its operations and optimize its cost structure, which could improve its operating efficiency and drive profitability. So, the company’s outlook looks healthy.
