Up until 2022, growth investors hadn’t had much to complain about for much of the past decade. The low-interest-rate environment allowed unprofitable companies to borrow money as needed to fuel sales growth. Investors were far more concerned with year-over-year growth numbers than valuation.
The pandemic is largely to blame for the end of the historic bull run that began following the Great Recession. With interest rates as high as they are today, there’s been a returned focus on value, which has led to a recent selloff in growth stocks.
In the short term, especially as interest rates remain this high, I’m not overly optimistic for the stock market’s returns in 2023. As a growth investor myself, though, I’m certainly hoping for a better performance than last year.
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The importance of keeping a long-term mindset
Despite my slightly pessimistic expectations for the year, it’s not preventing me from continuing to invest. My focus remains on the long term, meaning a decade and longer. With a time horizon like that, there are loads of opportunities to take advantage of on the TSX today.
I’ve reviewed three top Canadian growth stocks that I’ve got on my watch list right now.
Growth stock #1: Descartes Systems
Descartes Systems (TSX: DSG) has quietly been consistently outperforming the S&P/TSX Composite Index for the past two decades. The tech stock also fared impressively well last year, especially compared to many of its tech peers.
Over the past five years, shares are up more than 150%. In comparison, the Canadian stock market has returned just over 20%, excluding dividends.
The company provides cloud-based software for supply chain management operations. The objective of the software is to improve productivity and security for its customers.
The lack of notoriety for this growth stock may be due to the niche market that the company specializes in. But with demand not expected to begin slowing anytime soon, I’d bank on many more years of marketing-beating gains for this top growth stock.
Growth stock #2: Docebo
It’s been a wild ride for Docebo (TSX: DCBO) ever since the company went public in late 2019.
Shares surged in the early days of the pandemic, as demand skyrocketed for the company’s software. The sudden rise in remote work made Docebo’s learning management software that much more important for workforces across the globe.
The tech stock is up more than 200% from the price it went public at but is currently trading far below all-time highs.
Even with the current discount, though, shares aren’t exactly cheap. However, if you’re looking for a high-flying growth stock loaded with multi-bagger growth potential, Docebo is worth paying a premium for.
Growth stock #3: goeasy
goeasy (TSX: GSY) hasn’t gone on sale like this in a long time. Even after a nearly 40% drop in 2022, though, the growth stock has still impressively returned close to 200% over the past five years.
High interest rates are one reason to blame for the growth stock’s recent pullback. Consumer borrowing unsurprisingly slowed in 2022, which meant a drop in demand for goeasy.
Interest rates may remain high in the coming months, possibly even through the remainder of the year. But they will eventually return to, at or at least near, pre-pandemic levels. As we gradually see that happen, it won’t take long for goeasy to return to all-time highs.
