This 1 TSX Growth Stock Could Double Soon

This TSX growth stock looks highly undervalued, despite its solid sales growth trends and strong outlook.

Upwards momentum

Image source: Getty Images

A massive tech sector-wide crash has made most growth stocks on the TSX look cheap. However, it’s not easy for new investors to pick a growth stock to invest in, as it requires a detailed analysis of a company’s past financial performance and future growth outlook. In this article, I’ll talk about one of the most attractive growth stocks you can buy on the TSX today, which has the potential to double or even triple in the near to medium term.

The best TSX growth stock to buy now

Dye & Durham (TSX: DND) is a Toronto-based software firm with a market cap of about $1.2 billion. The company primarily focuses on providing cloud-based software and technological solutions to enhance the productivity and efficiency of legal, financial, and business professionals. This TSX growth company also has been aggressively expanding its global market reach and customer base by new acquisitions.

Based on its fiscal year 2021 (ended in June 2021) sales, Dye & Durham made nearly 61% of its total revenue from its home market, while the United Kingdom and Australia accounted for the remaining 20% and 11%, respectively. In 2022 so far, DND stock has dived by 61.3% to $17.35 per share, underperforming the broader market by a huge margin. By comparison, the TSX Composite benchmark currently trades with about 5% year-to-date losses.

After the global pandemic accelerated the shift to digital commerce and encouraged remote work culture, more business professionals than ever have started showing interest in Dye & Durham’s innovative software solutions as it helps them integrate workflows into one easy-to-use platform. As a result, the company reported an outstanding 219% YoY (year-over-year) jump in its sales to $209 million in its fiscal year 2021, exceeding analysts’ estimate of around $201.2 million. During the fiscal year, Dye & Durham’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) also increased by 217% YoY to around $ 116.4 million with an outstanding margin of 55.7%.

While the company hasn’t yet reported its June 2022 quarter results, its strong financial growth trends continued in the March quarter. In the third quarter of its fiscal year 2022, Dye & Durham’s total sales rose by 78.3% YoY to $122.9 million with the help of increased revenue from its acquisitions in the previous 12 months. Similarly, its adjusted quarterly EBITDA rose by 77.6% YoY to $66.8 million.

Strong growth outlook

Based on consistently surging demand for its software offerings, Dye & Durham’s recent sales growth trends could be just the start of its robust long-term growth story. This could be one of the key reasons why Street analysts expect its total revenue in the ongoing fiscal year to rise by around 130% over the previous year. Moreover, the company is continuing to focus on new quality acquisitions, which could help it accelerate its growth further in the coming years.

Given all these factors, this TSX growth stocks look highly undervalued when it’s down more than 60% year to date; it has the potential to recover sharply in the coming quarters.

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.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Stocks for Beginners

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

3 Millionaire-Maker Tech Stocks That Should Be on Your Radar

These three tech stocks have already proven themselves worthy, but have a lot more to prove in the near future.…

Read more »

A close up image of Canadian $20 Dollar bills
Tech Stocks

3 No-Brainer Stocks to Buy With $20 Right Now

These three stocks are easy buys for those who don't have all that much to spend, and want long-term growth…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Stocks for Beginners

The Top 3 Long-Term TSX Growth Stocks to Buy Today

These three growth stocks might be some of the best-performing stocks of the last year, but according to analysts so…

Read more »

financial freedom sign
Dividend Stocks

5 Steps to Financial Freedom for Canadian Millennials

Follow these steps and nothing can stop Canadian millennials from achieving their early retirement dreams.

Read more »

A person builds a rock tower on a beach.
Stocks for Beginners

How to Start Investing With Just $1,000

Even just $1,000 can turn into retirement income with the right investment strategy. So, here's how to get started.

Read more »

concept of real estate evaluation
Dividend Stocks

BRE Stock: Should You Buy the 10.5% Yield?

BRE stock (TSX:BRE) offers investors the opportunity for a rebound in a real estate sector that should see high prices…

Read more »

A bull outlined against a field
Stocks for Beginners

Top 5 Sectors to Watch in a Bullish Market

Do you want growth in a bull market? These aren't just the sectors to watch but the stocks that should…

Read more »

little girl in pilot costume playing and dreaming of flying over the sky
Dividend Stocks

For a Shot at $6,228/Year in Passive Income, Buy 755 Shares of This TSX Stock

Looking for passive income? You'll need to look beyond only dividends. Which is why EIF stock could be one of…

Read more »