Growth stocks provide investors an opportunity to derive exponential returns and create generational wealth over time. These stocks typically trade at a premium and trail major indices by a wide margin when market sentiment turns bearish. But they generate market-beating gains in a bull run.
The risk-reward profile for growth stocks is quite compelling, making them ideal for those with a high-risk appetite. So, here are three top growth stocks to buy right now.
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Tesla stock
One of the top-performing stocks in the past decade, Tesla (NASDAQ: TSLA) is up 6,600% since April 2013. Currently trading 55% from all-time highs, TSLA stock is valued at a market cap of US$610 billion, making it among the largest companies globally.
A leader in the electric vehicle space, Tesla has increased sales from US$24.5 billion in 2019 to US$81.4 billion in 2022. In Q4 of 2022, its sales were 37% year over year at US$24.3 billion, while the top line surged 51% last year. Due to economies of scale, Tesla’s net income more than doubled to US$12.6 billion in 2022.
Despite a volatile and tricky macro-environment, Tesla produced 440,000 vehicles in Q1 of 2023, compared to estimates of 430,000 vehicles. Vehicle deliveries were up 36% compared to the year-ago period, which is quite impressive. Tesla reduced EV prices in the last year, resulting in higher demand. It’s on track to end 2023 with sales of US$103 billion and adjusted earnings of US$3.9 per share.
So, TSLA stock is priced at six times forward sales and 47 times forward earnings, which is quite steep. Moreover, investors remain wary of rising competition from both new and legacy EV manufacturers, which might impact Tesla’s revenue and profit margins.
However, Tesla’s wide economic moat, expanding portfolio of vehicles, and improving profit margins make it a top stock to own in April 2023.
Neighbourly Pharmacy stock
Among the fastest-growing companies in Canada, Neighbourly Pharmacy (TSX: NBLY) is valued at a market cap of $980 million. It operates a wide network of community pharmacies in underserved Canadian markets. In fiscal 2023 (ended in March), Neighbourly Pharmacy acquired 113 pharmacies, compared to 111 outlets in the three prior years.
Analysts expect the company to end fiscal 2023 with $755 million and adjusted earnings of $0.46 per share. So, NBLY stock is priced at 1.2 times forward sales, which is very reasonable for a growth stock.
The TSX stock is also trading at a discount of 40% to consensus price target estimates.
Dentalcorp stock
The final growth stock on my list is Dentalcorp (TSX: DNTL), a company valued at $1.6 billion by market cap. Dentalcorp acquires and partners with dental practices to provide health care services in Canada.
In 2022, it increased sales by 21.5% year over year to $1.3 billion while adjusted free cash flow surged 38% to $124.6 million, indicating a margin of 10%. In Q4, the company added seven dental practices to its portfolio, which will add close to $5 million in adjusted EBITDA (earnings before interest, tax, depreciation and amortization) each year. It ended 2022 with 542 dental practices, compared to 458 practices in 2021.
Down 53% from all-time highs, DNTL stock is currently priced at a discount of 60%, given consensus price target estimates.
