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

Business man on stock market financial trade indicator background.
Tech Stocks

1 Growth Stock Down 50 Percent to Buy Right Now

There are plenty of growth stocks in the market worth considering, but Shopify (TSX:SHOP) looks like one of the best…

Read more »

Woman has an idea
Tech Stocks

Prediction: 1 Stock That Could Trounce the Market 

The TSX has been favouring tech stocks, but not this one. However, it has the potential to trounce the market…

Read more »

clock time
Tech Stocks

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

These three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Businessman holding AI cloud
Tech Stocks

AI Will Transform Everything: Investors, Be Early Adopters and Buy These 3 Stocks

Investors looking to invest in companies doing big things in AI should consider these three stocks for their portfolios.

Read more »

stock research, analyze data
Tech Stocks

Forget Shopify: These Unstoppable Stocks Are Better Buys Today 

Should you consider buying Shopify stock while rivals consider a buyout or should you go for stocks with a stronger…

Read more »

A colourful firework display
Tech Stocks

2 Potentially Explosive Stocks to Buy in March

These two growth stocks are destined for many more years of market-crushing returns.

Read more »

edit CRA taxes
Tech Stocks

TFSA Millionaires Are Learning They Can Still Be Taxed

If you day trade stocks like Shopify (TSX:SHOP) in a TFSA, you may be taxed.

Read more »

Shopping and e-commerce
Tech Stocks

Where Will Lightspeed Stock Be in 5 Years?

Lightspeed stock (TSX:LSPD) continues to be touch and go, so what might happen in the next five years?

Read more »