AUS
NZ
UK
CA
USA
IND
Investing in growth stocks that show potential to increase revenue, earnings, and cash flow over time is a proven strategy for building long-term wealth and achieving significant returns. In this article, we explore two compelling TSX growth stocks that are positioned to outperform in the coming decade.
Datadog (NASDAQ:DDOG)
Datadog, valued at US$42.7 billion by market capitalization, operates as a leading observability and security platform for cloud applications. The company's suite of products includes infrastructure and application performance monitoring, log management, network monitoring, workflow automation, and application security management.
Despite challenges in the macroeconomic environment and reduced enterprise spending, Datadog reported impressive sales of US$611 million in the first quarter of 2024, marking a 27% year-over-year increase. The company ended the quarter with 28,000 customers, up from 25,500 in the previous year.
A significant indicator of Datadog’s growth is the number of customers spending at least US$100,000 annually, which increased from 2,910 to 3,340 over the past year, accounting for 87% of its annual recurring revenue (ARR). Notably, Datadog stands out among its peers by reporting a free cash flow of US$187 million with a 31% margin, highlighting its operational efficiency and financial strength.
The company attributes its revenue growth to expanding its customer base and increasing customer spending. In Q1, a growing number of customers adopted multiple products, with 23% using at least six products compared to 19% the previous year. Moreover, about 2,000 customers are utilizing Datadog’s AI integrations, underscoring its technological relevance and customer adoption.
Restaurant Brands International (TSX: QSR)
Restaurant Brands International, the parent company of popular fast-food chains like Burger King, Tim Hortons, and Popeyes, presents another attractive growth opportunity. Since its IPO in late 2014, QSR stock has delivered over 200% returns to shareholders, complemented by a current dividend yield of 3.2%, supported by an annual payout of US$2.32 per share.
Recent strategic moves by Restaurant Brands International in China underscore its commitment to growth. The acquisition of Popeyes China from Tims China for US$15 million expands RBI’s footprint in one of the largest quick-service restaurant markets globally. Additionally, RBI’s partnership with Cartesian Capital involves a US$50 million investment in Tims China to fuel its expansion via convertible notes, highlighting confidence in future growth prospects.
Despite trading below its all-time highs, QSR stock is attractively priced at 21.4 times forward earnings, with anticipated earnings growth of 10% annually over the next five years. This valuation suggests potential for capital appreciation alongside dividend income, making it a compelling choice for investors seeking growth and income stability.
Investing in growth stocks like Datadog and Restaurant Brands International presents opportunities for outsized gains in the coming decade. These companies demonstrate strong fundamentals, strategic growth initiatives, and a track record of delivering value to shareholders through revenue expansion, earnings growth, and dividend payments. By considering these stocks, investors can position themselves for long-term wealth accumulation while navigating the evolving dynamics of the global market.
