CSU:CC - Investing in Canada: The Hottest Stocks for Explosive Growth
2023-06-06 16:15:00 ET
Canada’s stock market isn’t dominated by explosive growth stocks. Instead, much of the market is focused on mundane energy and financial services firms. However, some sectors of the technology industry could offer opportunities to expand wealth rapidly.
Here are the top three stocks with double-digit explosive growth rates that should be on your radar in 2023.
Shopify
Canada’s most beloved tech stock has recently fallen out of favour. The e-commerce giant has lost 63% of its value since hitting a peak in 2021. Its path to recovery could be long and arduous. However, the underlying business is still growing at a respectable clip.
The company’s total revenue expanded 28% year over year in the fourth quarter of 2022. Meanwhile, Shopify’s ( TSX:SHOP ) gross profit was 15% higher.
Consumers are struggling with the rising cost of living and borrowing this year, which makes these numbers even more impressive. If the economy recovers and rates moderate over the medium term, Shopify’s growth could accelerate further. Even at 20% annual growth, which is lower than its historical average, this stock is worth watching.
WELL Health Technologies
WELL Health Technologies ( TSX:WELL ) is another out-of-favour stock, perhaps because most investors consider it a pandemic stock. However, this tech company is so much more than that.
WELL Health has an extensive portfolio of medical data management, virtual healthcare and patient management technologies. It also has a network of physical clinics spread across Canada.
There are four major reasons I expect WELL Health to continue growing: Canada’s healthcare is being increasingly privatized by provinces, the company is expanding its footprint in America, the company has added artificial intelligence (AI) features recently and the stock is undervalued.
In its most recent quarter, revenue surged 34% over the previous year. The management team recently upgraded its outlook for 2023 and now expects $690 million to $710 million in annual revenue. Meanwhile, the company’s market value is just $1.2 billion, which implies a price-to-revenue ratio of 1.7.
WELL Health is a severely undervalued growth stock .
Constellation Software
Enterprise software giant Constellation Software ( TSX:CSU ) is perpetually under the radar. Most investors aren’t familiar with this company, because it’s not involved in the sexiest segments of the tech industry.
Instead, Constellation focuses on niche, mundane software applications that are mission critical for corporate clients. Its growth is fueled by acquisitions. In recent months, the correction in tech valuations has created plenty of opportunities for this mega-acquirer. Constellation has deployed well over $1 billion to consolidate the software industry over the past year.
I expect these recent acquisitions to be fully integrated with the core business soon, which means earnings and revenue should surge higher. Meanwhile, the stock is trading near an all-time high. Constellation is worth $58.6 billion, which is just 24 times the annual free cash flow available to shareholders based on my estimates.
Free cash flow is surging. It was up 40% year over year in the most recent quarter. This pace may be unsustainable over the long run but certainly justifies the company’s current valuation.
The post Investing in Canada: The Hottest Stocks for Explosive Growth appeared first on The Motley Fool Canada .
Fool contributor Vishesh Raisinghani has positions in Constellation Software, Shopify, and Well Health Technologies. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy .
2023