Similar to an economic recession, a bull market is inevitable. As market sentiment improves, a bull run may come later this year or in 2024. The best-performing stocks in a bull market are those armed with a strong underlying business while trading at reasonable valuations.
Here are two such growth stocks I might add to my TFSA (Tax-Free Savings Account) right now. Why growth stocks? Because they tend to generate market-thumping gains in a bull run. Additionally, if held in a TFSA, returns in the form of capital gains or dividends are exempt from Canada Revenue Agency taxes.
MongoDB stock
Down 63% from all-time highs, MongoDB (NASDAQ: MDB) stock is valued at a market cap of US$15 billion. The company operates a developer data platform that is used by more than 40,000 customers in 100 countries.
A sluggish business environment has led to a deceleration in revenue growth for MongoDB. The company has increased sales from US$421 million in fiscal 2020 to US$1.3 billion in fiscal 2023 (ended in January), indicating annual growth rates of 45%. Wall Street now expects MDB sales to increase by 17.4% to US$1.5 billion in fiscal 2024 and by 21% to US$1.8 billion in fiscal 2025.
Its top-line growth is expected to remain tepid in the near term as customers have reduced their workloads on MongoDB’s platform to lower expenses.
However, a research report from IDC forecasts the data management software market to touch US$138 billion in 2026, up from US$85 billion in 2022, providing MongoDB with enough room to grow its top line.
Additionally, analysts also expect MDB stock to increase adjusted earnings from US$0.81 per share in fiscal 2023 to US$1.52 per share in fiscal 2025. Wall Street is bullish on MongoDB stock and expects shares to surge by 15% in the next 12 months.
Payfare stock
A fintech company trading on the TSX, Payfare (TSX: PAY) provides instant payout and digital banking solutions to gig economy workers in North America. Its platform provides access to earnings and banking services that include ATM withdrawals, fund transfers, and bill payments. Valued at a market cap of $321 million, Payfare stock is down 50% from all-time highs.
The company generates 75% of its revenue from interchange fees from payment networks and the rest from user banking fees. Its GDV, which is the debit volume processed on the Payfare platform, has increased to $38.4 billion in Q4 of 2022 from $4.8 billion in Q1 of 2021. PayFare ended 2022 with more than one million users on its platform, up from just 55,000 at the end of 2020.
This exponential growth has allowed Payfare to increase sales from $6 million in 2019 to $130 million in 2022. Bay Street expects sales to touch $244 million in 2024, while adjusted earnings are forecast to improve to $0.63 per share next year, compared to a loss of $0.06 per share in 2022. So, PAY stock is priced at 1.3 times 2024 sales and 10.4 times forward earnings, which is really cheap.
The company’s widening margins and stellar revenue growth make Payfare stock a top bet right now. Bay Street expects PAY stock to gain 100% in the next 12 months.
