Growth stocks will have the potential to grow their financials above the industry average, thus delivering superior returns. Given their growth potential, investors are ready to pay a premium to own these stocks. So, growth stocks trade at a higher valuation, thus making them riskier. However, investors with higher risk tolerance abilities and longer investment horizons can buy these three stocks to earn superior returns.
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WELL Health Technologies
WELL Health Technologies (TSX:WELL) develops products and services to support healthcare professionals in delivering positive patient outcomes. The digitization of patient records, increased usage of software solutions in the healthcare sector, and rising adoption of virtual healthcare services have expanded the company’s addressable market. The company continues to launch new products and invest in artificial intelligence to develop innovative products and tools to expand its market share.
Further, it has partnered with Microsoft to expand digital healthcare services across North America. Its growing patient visits and continued acquisitions could support its growth in the coming quarters. Further, the company’s profitability has been improving due to the adoption of its comprehensive cost-cutting program last year. Also, it repaid $14 million of debt in the second quarter, lowering its leverage ratio to 2.67.
Amid these growth initiatives, WELL Health’s management has projected its 2024 revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to grow by 26.3% and 12.4%, respectively. Despite its healthy growth prospects, the company trades at one times analysts’ projected sales for the next four quarters, making it an excellent buy.
Docebo
Docebo (TSX:DCBO) offers an end-to-end learning platform to organizations worldwide. With the growing adoption of digital learning tools, the learning management solution (LMS) market is growing at a healthier rate, thus expanding the company’s addressable market. Meanwhile, the company continues introducing innovative features that could expand its customer base.
Docebo has adopted several growth initiatives to grow its business in enterprise, OEMs (original equipment manufacturers), and government segments. Further, around 81% of its clients have signed long-term agreements, which would stabilize its financials. Meanwhile, the company’s management had raised its 2024 guidance after reporting its second-quarter earnings. The management projects its top line to grow 18-19% while its adjusted EBITDA margin could come between 15-15.5%, a substantial improvement from 9% in 2023. Given its healthy growth prospects and improving profitability, I believe Docebo could deliver superior returns over the next three years.
goeasy
goeasy (TSX:GSY) has grown its top line and diluted EPS (earnings per share) at an annualized rate of 20.2% and 28.1% for the last five years. Continuing its uptrend, the company’s revenue and adjusted EPS have grown by 25% and 24% in the first two quarters of this year. It funded $1.51 billion of loan originations during the period, expanding its loan portfolio to $4.14 billion.
Meanwhile, goeasy continues to introduce new products, expand its distribution channels, and invest in strengthening its digital infrastructure, which could continue to grow its loan portfolios. Further, the falling interest rates could boost economic activities and drive loan demand, thus benefiting the company. The subprime lender has adopted next-generation credit models and tightened its underwriting and income verification processes, which could lower its business risks and drive profitability.
Moreover, goeasy has raised its dividend at an annualized rate of 30% for the previous 10 years, while its forward yield currently stands at 2.6%. Given its healthy growth prospects, solid financials, and consistent dividend growth, I am bullish on goeasy.
