Top Growth Stocks on the TSX Index

Top growth stocks such as Real Matters (TSX:REAL) and Alamos Gold (TSX:AGI)(USA) are poised to outperform over the next few years.

| More on:
A person suffering

Image source: Getty Images

Growth stocks continue to outperform, a continuation of a trend that began after the last financial crisis. This is not surprising if you consider that growth stocks do quite well in a bull market. We just emerged from the longest bull run in history. 

In a bear market, growth stocks tend to lose value at a faster pace than income and value stocks. However, all bets are off in the bear market of 2020. It has been an unprecedented event that’s causing investors to rethink their investment plans. Led by the tech industry, stocks with strong growth rates are doing quite well.

In the majority of cases, growth has been stunted thanks to the COVID-19 pandemic. However, there are still several that are expected to post impressive growth rates. These are the stocks that are positioned to outperform in a prolonged bear market or if the market rallies. 

With that in mind, here are two of the top growth stocks on the TSX Index

A gold stock poised for a strong second half

The price of gold is touching multi-year highs and producers are faring quite well. One stock that is set for a strong second half is Alamos Gold (TSX:AGI)(NYSE:AGI). The company’s stock price is up 41% year to date and the best is yet to come. 

Despite the temporary mine closures as a result of COVID-19, analysts expect the company to grow earnings and revenue by 39.66% and 9.63% in 2020. In 2021, estimates are for 72.81% earnings growth and for revenue to jump by 25.15%. 

Production growth is being fuelled by the lower mine expansion at Young-Davidson. The mine will enter operation by the end of July and is expected to fuel significant cash flow in the second half. 

Trading at just 31.19 times earnings, it sports a PE to growth (PEG) ratio of only 0.33 — an indication that the company’s stock price is not keeping up with growth expectations. This makes it one of the most attractive growth stocks on the Index. 

A high-growth tech stock 

Another attractively valued growth stock is Real Matters (TSX:REAL)(NYSE:REAL). The company’s proprietary mortgage and lending software platform is quickly gaining traction among industry agents. After a bumpy start post IPO, the company has since reeled off six consecutive quarters of beating quarterly estimates. 

Speaking of estimates, analysts are expecting average annual earnings and revenue growth of 47.2% and 31.63% respectively. Given the company’s habit of beating on both the top and bottom lines, these estimates may be on the low end. 

It is also worth noting that Real Matters is the top growth stock in the technology industry. It is the only company that will grow earnings and revenue at a 30%+ clip. Not even Shopify has such rates given its spotty earnings history. 

It is also one of the best valued tech stocks. It’s trading at just 3.7 times sales, which is well below the likes of Shopify and Kinaxis, which have P/S ratios of 25.52 and 15.90 respectively. As well, it has a PEG ratio of 0.30, the lowest in the technology industry. 

Foolish takeaway

Growth stocks require a higher level of risk tolerance. As their valuations are more dependent on future estimates than historical performance. That said, both Almost Gold and Real Matters have an attractive risk-to-reward profile given current valuations and outsized growth rates. 

Even if they fail to meet expectations, they can still grow substantially and limit downside given their decent valuations. In the event, they meet or beat expectations then they are likely to be some of the best-performing growth stocks on the TSX Index.

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.

Fool contributor Mat Litalien owns shares of Shopify. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify.

More on Tech Stocks

data analyze research
Tech Stocks

2 TSX Growth Stocks I’d Buy and Hold Forever

Given their long-term growth potential and discounted stock prices, I believe these two TSX growth stocks would be an excellent…

Read more »

A worker uses the cloud for paperless work. tech
Tech Stocks

1 Little-Known Canadian Stock to Buy Before Everyone Else Does

Softchoice is a top TSX stock for value and growth investors due to its widening profit margins and top-line expansion.

Read more »

four people hold happy emoji masks
Tech Stocks

3 Undervalued Canadian Stocks Worth a Buy Right Now

These Canadian stocks remain highly underrated, given their future path to growth and past performance that remains incredibly strong.

Read more »

Man holding magnifying glass over a document
Tech Stocks

Stock Split Watch: Is Constellation Software Next?

Many stocks that got to the same price as Constellation Software (TSX:CSU) split their stocks. Is CSU next?

Read more »

Shopping and e-commerce
Tech Stocks

Lightspeed Stock Fell 15% in November – Is it a Buy Today?

Lightspeed stock may have a rough 2023, but that doesn't mean you should ignore it, even after shares dropped .

Read more »

A gamer uses goggles to play an augmented reality game. tech
Tech Stocks

1 Growth Stock to Buy Ahead of the Trillion-Dollar Metaverse Opportunity

One TSX growth stock is an exciting prospect and strong buy as the full development of the Metaverse unfolds.

Read more »

A worker uses a laptop inside a restaurant.
Tech Stocks

2 Promising Growth Stocks to Buy in December 2022

Growth investors had better act fast, because these fire-sale prices won’t last forever. Here are two discounted growth stocks to…

Read more »

Dice engraved with the words buy and sell
Tech Stocks

Selling Losers Before 2023? Buy These 2 TSX Stocks With the Proceeds 

There is one month to 2023. Now is the time to sell your loss-making stocks, take the tax advantage, and…

Read more »