Due to the recent selling, the S&P/TSX Composite Index is down over 10% this year. While the selloff wiped out billions from the market cap of several stocks, this also creates a solid investment opportunity, as several top TSX growth stocks are now trading at levels that are at a multi-year low.
So, for investors willing to create significant wealth and beat the TSX by a wide margin, here are my top two picks.
Docebo
Amid the recent selloff, technology stocks took the hardest hit. Thus, it is prudent to pick a few high-quality stocks from the tech sector to benefit from the recovery in their prices. Docebo (TSX: DCBO)(NASDAQ: DCBO), offering a cloud-based e-learning platform, is an attractive investment at current price levels.
It has lost approximately 55% this year and is down about 68% from its 52-week high. This significant drop is an excellent buying opportunity for investors. Docebo’s business is growing fast, with its annual recurring revenues (a key measure for future revenue growth) growing at over 50%. Further, its recurring revenues now represent about 91% of its total revenue, which is encouraging and adds stability.
Also, Docebo’s enterprise customer base is growing, with 2,947 customers at the end of Q1. Moreover, increasing penetration of multi-year contracts, high customer retention rate (113%), and higher deal value (stood at US$44,000 at the end of Q1) are encouraging. Also, its ability to generate higher revenue from existing customers at a minimal cost, opportunistic acquisitions, and new product development bode well for growth.
While Docebo’s business is growing fast, its stock is trading cheap. Docebo’s EV/sales (enterprise value/sales — a valuation ratio comparing the total value of Docebo to its revenue) multiple of 4.8 is lower than pre-COVID levels, making it attractive at the current price point.
Nuvei
Shares of the payment tech company Nuvei (TSX: NVEI)(NASDAQ: NVEI) have dropped approximately 76% from the 52-week high. While concerns over its future growth have led to a selloff in Nuvei stock, none of those concerns have played out yet. Moreover, Nuvei continues to deliver stellar financials and benefits from solid demand.
For context, Nuvei was up against tough year-over-year comparisons in Q1. Despite tough comps and a challenging macro environment, the strength in Nuvei’s revenues and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization — a measure of profit) registered a growth of 43% and 40%, respectively.
Further, Nuvei expects the momentum in its business would sustain and sees its revenues growing at an average annualized rate of over 30% in the medium term.
Looking ahead, its investments in sales and marketing, a reacceleration in e-commerce growth, and the expansion of alternative payment methods on its platform will drive its customer base and support its overall growth. Further, its expansion into high-growth markets and verticals (like social gaming), new product launches, acquisitions, and ability to increase its revenues at limited incremental sales and marketing costs will likely drive its revenue and profitability.
Nuvei’s valuation is also tempting. It trades at an EV/sales multiple of 4.7, which is low and compares favourably to its historical average of 15.2.
