3 Growth Stocks Down 25% to 75% I’d Buy Today

These beaten-down growth stocks have the potential to deliver above-average returns in the medium to long term.

| More on:
Money growing in soil , Business success concept.

Image source: Getty Images

Growth stocks, primarily of the companies that are still not profitable, disappointed in 2022. Several TSX growth stocks lost about 25% to over 75% of their value year to date. While this pullback is painful, it is an opportunity to invest in some of these high-quality growth stocks and gain from the recovery in their prices.

Against this backdrop, let’s look at three growth stocks that are down by at least 25% to 75% but have the potential to deliver superior returns in the medium to long term. 

goeasy

Down about 37% year to date, goeasy (TSX:GSY) stock is a must-have growth stock in a long-term portfolio to beat the broader market averages by a wide margin. It provides leasing and lending services to subprime consumers. It has consistently delivered stellar growth (its revenues and adjusted earnings per share have increased at an average annualized growth rate of 15.9% and 29.1% between 2011 and 2021). 

Further, in the first half of 2022, goeasy delivered a 30% growth in its top line. Meanwhile, its adjusted net income increased by 15%. 

goeasy’s stellar growth is driven by the continued expansion of its loan portfolio, stable credit quality, and strong payment volumes. Further, management is confident about growing its top line at a double-digit rate, supporting its bottom-line growth in the coming years. Loan growth, a large addressable market, its wide product range, and omnichannel offerings will support its growth. 

The decline in goeasy stock, despite the company’s strong financial performance, suggests that the pullback is unwarranted, and an improvement in the economy will significantly boost its stock price. Further, goeasy is a solid Canadian dividend stock (it is a Dividend Aristocrat), and its growing earnings base indicates that it could continue to enhance its shareholders’ returns by consistently increasing its dividend. 

Docebo

Like goeasy, Docebo (TSX:DCBO) stock lost substantial value (down over 58%) this year, despite strong financial performance. However, unlike goeasy, Docebo has no consistent history of profitable growth, which weighed on this tech stock.

Nevertheless, Docebo is benefitting from higher annual recurring revenues (increased by 48% in the second quarter), led by a growing enterprise customer base, an increase in average contract value, and a high retention rate. Further, it has positive free cash flows, which is encouraging.  

Looking ahead, Docebo’s increasing deal size, increased revenues from existing customers, and improved sales and marketing productivity would help the company turn profitable. Further, strategic acquisitions and product expansion will likely accelerate its growth. 

Shares of this corporate e-learning platform provider are trading at a forward enterprise value-to-sales multiple of four, which is even lower than pre-pandemic levels of seven, implying a solid opportunity for buying. 

Shopify

Shopify (TSX:SHOP) stock has declined throughout this year and is down over 75% year to date. This massive correction in Shopify stock follows the general market selling tech stocks, a slowdown in growth amid a normalization of its growth rate, and weak economic conditions triggering fear of a recession.

The correction in Shopify stock presents an attractive opportunity to buy cheap. Further, Shopify’s fundamentals stay solid, implying it could bounce back quickly, as the economic conditions improve. The internet commerce platform provider has made significant investments in its sales and marketing, POS (point of sale), and fulfillment offerings, which positions it well to capitalize on the ongoing digital shift in selling models. 

Shopify faces easier comparisons in the coming quarters. Moreover, increased adoption of its payments and capital offerings bode well for growth. Its acquisition of Deliverr will strengthen its fulfillment, while partnerships with social media platforms drive more merchants to its platform. Overall, Shopify is poised to deliver solid growth in the coming years. 

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Docebo Inc. The Motley Fool has a disclosure policy.

More on Tech Stocks

Dice engraved with the words buy and sell
Tech Stocks

Selling Losers Before 2023? Buy These 2 TSX Stocks With the Proceeds 

There is one month to 2023. Now is the time to sell your loss-making stocks, take the tax advantage, and…

Read more »

Arrowings ascending on a chalkboard
Tech Stocks

Why I Think Nuvei Stock Has Market-Beating Potential

Given its growth initiatives, expanding addressable market, and attractive valuation, I believe Nuvei has the potential to outperform the broader…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

Shopify Stock Rose 15% in November: Is it a Buy Today?

Shopify (TSX:SHOP) stock rallied 15% this month but is still down 69% year to date, so should investors worry that…

Read more »

smiling couple at home with christmas tree
Tech Stocks

Holiday Bonus? You Could Double it With This TSX Stock

GSY stock gives investors an incredibly likely chance of doubling their holiday bonus in just over a year through a…

Read more »

Automated vehicles
Tech Stocks

BB Stock Rose 3% in November – Is it a Buy Today?

Blackberry stock remains battered and bruised, but momentum is building and revenue is ramping up, giving us a glimpse of…

Read more »

Businessman holding AI cloud
Tech Stocks

3 Best Artificial Intelligence Stocks to Buy in December 2022

Investors anticipating a strong comeback by the tech sector in 2023 should take positions in three of the best AI…

Read more »

tsx today
Tech Stocks

TSX Today: What to Watch for in Stocks on Friday, December 2

TSX investors may want to remain cautious ahead of Bank of Canada’s upcoming interest rate decision due next week.

Read more »

value for money
Tech Stocks

The Market Is Picking Up: 3 Top Growth Stocks to Buy While They’re Still Great Deals

Given their discounted stock prices and healthy growth prospects, I believe it's a good time to add these three stocks…

Read more »