If you’re looking at the earnings pour in and don’t know where to turn, we’ve got you. Today, we’re looking at two growth stocks that may have shot up after earnings but are still far from top potential. Today, let’s get into two exciting players in the Canadian stock market, each with a unique approach to growth that has caught the eye of investors.
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Shopify
Shopify (TSX:SHOP), based in Ottawa, is a leading platform that enables businesses to manage and grow online storefronts. In its recent third-quarter 2024 report, Shopify stock surprised the market with a revenue increase of 26% year over year, bringing in $2.16 billion and comfortably exceeding analyst expectations. This wasn’t just a fluke, either. Shopify’s net income also nearly doubled, climbing to $344 million.
One of Shopify’s most notable moves this year was its continued investment in artificial intelligence (AI), particularly with its new AI assistant, Sidekick. This tool helps merchants better manage their online presence and navigate sales, showcasing Shopify’s knack for using cutting-edge technology to add real value. As a result, the company’s gross merchandise volume (GMV), which measures platform success, rose by an impressive 24% this past quarter to $69.72 billion.
Looking towards the future, Shopify has provided an upbeat forecast for the fourth quarter, with anticipated revenue growth in the mid- to high-20s percentage range. This is particularly encouraging as it coincides with the holiday season, a prime time for e-commerce activity. With $5.02 billion in cash and minimal debt on its balance sheet, the company has plenty of flexibility for future investments and innovations. The high forward price-to-earnings (P/E) ratio of 81.97 might seem steep. Yet, it reflects the market’s faith in Shopify’s growth trajectory.
Dentalcorp
Meanwhile, dentalcorp (TSX:DNTL), headquartered in Toronto, offers a completely different type of growth potential of healthcare. In the third quarter of 2024, dentalcorp stock reported solid results, with revenue climbing 11.4% year over year to $375.4 million. Same practice revenue growth (SPRG), a key indicator of organic growth, also showed a healthy rise of 4.2%
Alongside revenue, dentalcorp has been improving its profitability. The company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 13.1% to $68.9 million, achieving an adjusted EBITDA margin of 18.4%. In fact, adjusted free cash flow (FCF) saw an impressive increase of 37.6% to reach $36.2 million.
A significant part of dentalcorp’s strategy has been its targeted acquisition of new dental practices. In the third quarter alone, dentalcorp added four new practices expected to contribute about $2.3 million in pro forma adjusted EBITDA after rent. Since then, the company has completed nine additional acquisitions, putting it on track to meet its annual acquisition targets. Looking forward, dentalcorp is maintaining an optimistic outlook for the fourth quarter of 2024, with revenue projected to grow by 8% to 10% over the previous year.
Bottom line
Although Shopify and dentalcorp come from very different sectors, each shares a common thread: strong financials and clear growth strategies that set them apart as affordable growth stocks. Shopify stock, with its tech-driven e-commerce model, offers a high-growth path that’s perfect for investors interested in innovation and digital retail. dentalcorp, however, provides exposure to the healthcare sector, with its recurring revenue and reliable demand. Together, these present a unique opportunity for diversification within a growth-focused portfolio.
