Growth has been dealt a massive uppercut straight to the chin over the past quarter. With so many previously high-flyers currently on the ropes, it’s tough to be a dip buyer. That said, I do think that many young investors with time horizons beyond five years could stand to do really well with some of the growthy plays that have fallen so far off the podium. While they may not bottom out anytime soon, I do think that they may be worth considering if you’ve got the pain tolerance and are willing to put in the analysis.
Remember, just because a stock has fallen by a great deal doesn’t mean it is near a bottom. Some stocks with damaged growth stories can free fall indefinitely. That’s why it’s so important to put in the homework and try to turn your version of a company’s narrative into inputs for your own financial models. That way, you’ll get a price that you should feel comfortable paying for. If a stock is going for well above your estimate of its current intrinsic value, it may make sense to catch a falling knife.
Now, catching falling knives is hard. It was never meant to be a go-to strategy for most investors. It can be painful, but if you have the risk tolerance and are willing to go against the grain, the results could have the potential to be sizeable, especially over a timespan of 5-10 years. Remember, investing is a long-term game, and the winners tend to think beyond the near-term events that rattle most weaker-handed investors out there.
In this piece, we’ll have a look at two growth stocks worth checking out here.
Docebo
Docebo (TSX:DCBO)(NASDAQ:DCBO) was arguably one of the hottest pandemic beneficiaries in 2020. With the tides turned against it, Docebo now finds itself down around 44% from its peak level, just shy of $120 per share. That’s a long way off. At writing, the stock goes for $66.66 per share, and although the firm isn’t profitable yet, the magnitude of growth could offset further negative impact of rising rates.
Indeed, most of the rate-induced damage has probably already been done. Add post-COVID headwinds into the equation, and DCBO stock seems to be priced as though it’s going out of style. Hybrid work isn’t going away once we’re in an endemic. Employees are calling the shots right now, and they don’t just want higher wages amid inflation. They want flexibility. Such trends could keep LMS (learning management system) firms, and other powerful remote work software elevated for longer.
The $2.2 billion Canadian LMS firm is not cheap, but it doesn’t deserve to be cheap, given the tailwinds that could outlast this sell-off and the pandemic.
Kinaxis
The supply chain of so many firms is in turmoil right now, yet supply-chain management software developer Kinaxis (TSX:KXS) finds itself down around 37% from its high of around $230 per share. While demand over the longer term could remain robust, the company is still quite expensive.
The nearly $4 billion Ontario-based tech company is in a bit of a rut, both due to idiosyncratic issues and broader macro concerns. Still, Kinaxis is one of the few top growth plays that I believe could rise out of the rubble over the next two years. It will not be easy, but with a stellar management team, I’d look for the supply-chain management software company to pick up where it left off before the latest brutal sell-off.
