Growth stocks have had a rough start to this year. Several tech companies have lost value, as the market pivots to traditional sector stocks. However, this sectoral rotation creates opportunities for growth investors to add exposure at better valuations.
Here are the top three growth stocks that are now trading below $20 each and could potentially double by next year.
Growth stock #1
Absolute Software (TSX:ABST)(NASDAQ:ABST) has tripled over the past year. That should cement its position as a growth stock. However, unlike other tech companies, Absolute seems to be underpriced considering its fundamentals and market potential.
The company provides cybersecurity tools. These tools secure laptops, smartphones and tablets used by employees. This sector is relatively boring but lucrative. Retail investors and consumers may not care about cybersecurity, but corporations are willing to invest heavily in protecting their data and assets.
Absolute’s stock price has declined 12% over the past few months, along with the rest of the tech sector. It now trades at just $18. That’s a price-to-sales ratio of just eight. It’s also a price-to-cash flow ratio of 20. Those metrics are rare in the tech sector.
The icing on the cake is Absolute’s 1.7% dividend yield. Once investors recognize the potential of the cybersecurity industry, stocks like Absolute could easily be worth twice as much.
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Growth stock #2
Cryptocurrencies saw tremendous adoption in 2020. In 2021, Bitcoin and Ethereum have been relatively stable even as the tech sector collapses. This could drive adoption further. Companies like Banxa (TSXV:BNXA) are the gatekeepers for the sector and could see a windfall with more adoption.
Banxa is a payment processor that allows users to convert fiat currencies into cryptocurrencies. It has partnered with industry leaders such as Binance, Trezor, and ShapeShift to help retail users adopt the technology using traditional payment methods such as Interac e-transfer and credit cards.
Banxa stock is currently trading for $6.7. The company’s market value is a mere $270 million. Meanwhile, it’s expected to transact hundreds of millions in crypto transactions in 2021. As the value of cryptocurrencies rise and adoption grows, Banxa could see a major windfall. The stock could easily double (if not more) if BTC and altcoins sustain their gains into 2022.
Growth stock #3
WELL Health Technologies (TSX:WELL) is my final growth stock pick. The stock has appreciated 448% over the past year. That’s because adoption of its virtual clinic and digital healthcare services expanded during the pandemic. Now, investors have been selling the stock assuming digital adoption will recede once the pandemic is over.
On the contrary, I believe the ease and convenience of remote medical attention is here to stay. The medical industry is still ripe for disruption. As WELL Health adds more acquisitions to expand its offerings into online pharmacies, fertility treatments, and software solutions, the stock price could accelerate further.
Keep this robust growth stock on your watch list for 2022.
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 Vishesh Raisinghani owns shares of Banxa Holdings Inc. and WELL Health Technologies.