Investors with a high-risk appetite can consider buying shares of growth stocks that generally have the potential to derive outsized gains. Typically, growth stocks beat the broader markets in a bull run and trail the indices when market sentiment turns bearish.
In the last 12 months, a volatile macro environment has driven valuations of growth stocks across sectors significantly lower. But you can now go bottom-fishing and buy quality companies at a much lower multiple.
Moreover, buying and holding these stocks in your TFSA (Tax-Free Savings Account) allows you to enjoy long-term capital gains without paying a single dollar to the Canada Revenue Agency in taxes.
The cumulative contribution room available to Canadians in the TFSA is $88,000 in 2023. Let’s see how you can use this amount to build a portfolio of growth stocks for a legit chance to earn $1 million. I have identified two such stocks that can help you turn an $88,000 investment into $1 million within the next two decades.
A cybersecurity behemoth
One of the market leaders in the cybersecurity space, CrowdStrike (NASDAQ: CRWD) is currently valued at a market cap of $28 billion. It has increased sales from US$481 million in fiscal 2020 to US$1.45 billion in fiscal 2022 (ended in January).
It’s on track to increase sales by 53.5% to US$2.23 billion in fiscal 2023 and by 32.7% to US$3 billion in fiscal 2024. So, CRWD stock is priced at less than 10 times forward sales and 60 times forward earnings, which is quite steep. But the high-flying tech stock is also down 60% from all-time highs.
CrowdStrike offers a cloud-based platform to enterprises allowing them to detect online threats and stop breaches. Its Falcon platform offers 23 cloud modules to clients via a SaaS (software-as-a-service) model spanning verticals such as cloud security, endpoint security, manage security, threat intelligence, and log management.
CrowdStrike ended the fiscal third quarter (Q3) with annual recurring revenue of US$2.34 billion, an increase of 54% year over year. It added 1,450 net new subscription customers ending the quarter with 21,146 customers, up 44% compared to the year-ago period. Further, subscription customers who adopted more than five modules were up 60% in Q3 of fiscal 2023.
CRWD stock is priced at a discount of more than 20% compared to Wall Street price target estimates.
A cannabis giant
Among the largest cannabis producers globally, Green Thumb Industries (CNSX: GTII) is valued at a market cap of $2.64 billion. Down 77% from all-time highs, GTII stock is attractively priced at current multiples, given it has increased revenue to US$1 billion in the last 12 months from US$216 million in 2019.
Green Thumb has a wide portfolio of branded cannabis products. It also owns and operates a chain of retail cannabis stores called RISE. Headquartered in Illinois, Green Thumb has 18 manufacturing facilities and 77 retail locations in 15 states south of the border.
GTII stock is priced at 1.5 times forward sales and 20 times forward earnings, which is very reasonable given its growth estimates. Right now, Green Thumb is trading at a discount of 180%, considering consensus price target estimates.
