Despite the concerns over expensive valuations, inflation, and rising COVID-19 cases from the Delta variant, the Canadian equity markets have remained resilient. The Canadian benchmark index, the S&P/TSX Composite Index, has increased by 16.4% for this year. Soaring commodity prices and improvement in economic activities appear to have driven the markets higher. Amid bullish sentiments, here are the three high-growth stocks that you could buy under $20 to earn superior returns.
Amid the secular shift towards online shopping, Goodfood Market (TSX:FOOD) would be an excellent stock to have in your portfolio. Today, the company reported solid third-quarter performance. Its top line grew 24% on a year-over-year basis, while its gross margins expanded by 6.2%. The expansion of its product offerings and same-day delivery capabilities drove its average basket sizes and order frequencies, boosting its sales. However, its adjusted EBITDA margin declined by 5.3% due to its ongoing investments in expanding its operations across the country.
With the online grocery industry growing at a rapid pace, Goodfood Market has considerable scope for expansion. The company is broadening its product offering, strengthening its last-mile delivery capabilities, and strengthening its production capabilities through additional facilities and investments in automation, which bodes well with its growth prospects. So, amid the favourable industry trend, I expect Goodfood Market to deliver superior returns over the next two years.
The cannabis industry could grow faster over the next few years amid rising medical usages and increased legalization. So, I have selected Hexo (TSX:HEXO)(NYSE:HEXO) as my second pick. The company focuses on organic growth and acquisitions to increase its market share and expand its geographical footprint. With an intent of further solidifying its market share in the cannabis-infused segment, the company launched six new products in April. Additionally, it is also working on regaining its market share in the hash segment by increasing its THC content.
HEXO recently completed the acquisition of Zenabis while working on acquiring Redecan and 48 North Cannabis. On closing these deals, HEXO could acquire a leadership position in the Canadian recreational cannabis space. The acquisitions could expand its product offerings with a complete portfolio of Cannabis 2.0 products, improve its production capabilities, and boost its cash flows. So, given its healthy growth prospects, Hexo could be an excellent buy right now.
My final pick is Absolute Software (TSX:ABST)(NASDAQ:ABST), which offers high-growth prospects. Its revenue and adjusted EBITDA are growing at a healthier rate amid the rising demand for endpoint resilience capabilities due to increased remote working and learning. The company focuses on launching new innovative products and services to acquire new customers and expand its market share. The company earns a significant percentage of its revenue from recurring sources, which is encouraging.
Apart from organic growth, the company is also looking at acquisitions. It recently acquired NetMotion Software for US$340 million. The acquisition could strengthen the company’s overall competitive position in the endpoint resilience market. Meanwhile, the company’s management expects its revenue to grow in double digits this year while expanding its adjusted EBITDA margin. Despite its healthy growth prospects, the company trades at a cheaper valuation than its peers. So, I am bullish on Absolute Software.
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.
The Motley Fool recommends Absolute Software Corporation, Goodfood Market Corp, and HEXO Corp. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.