Rising interest rates, persistent inflation, and geopolitical issues impacting the global economy have made stock market investing tougher than ever. The fears of a recession have made many stock market investors understandably wary of allocating money to growth stocks. Yet there is another way of looking at the current situation. Growth stocks have not been as cheap as this in a decade.
The selloff resulting from rising interest rates and macroeconomic factors was not surprising. With borrowing costs higher, businesses now have a tougher time funding growth, driving share prices lower and lower. While it does not seem like the most encouraging time to invest in growth stocks, there is no telling when an opportunity like this will come again.
While the risk is high, the reward can be handsome if it pays off. Today, I will discuss two Canadian growth stocks you should keep on your radar if you have a well-balanced portfolio that can offset potential losses.
TELUS International (TSX:TIXT) is a $1.94 billion market capitalization Canadian tech company offering IT services and multilingual customer support to a globally diversified client base.
The company has the reputation of being a digital customer experience innovator, designing, building, and delivering next-gen solutions. Serving clients across several industries, the tech stock is actually profitable and generates significant cash flows.
Between 2019 and 2022, TELUS International increased its revenue and net income by 142% and 165%, respectively. It also tripled its operating cash flow while growing its free cash flow 3.7-fold in that period. While 2022 was a slower year for TELUS International, the company did secure 12% revenue growth and increased its operating cash flow by 55%.
As of this writing, TELUS International stock trades for $26.45 per share, down by 45.67% from its October 2021 all-time high. Improvements in the macroeconomic situation can potentially trigger double-digit growth in the next three to five years.
Docebo (TSX:DCBO) is a $1.68 billion market capitalization cloud-based learning management systems provider. The company develops and offers cloud-based solutions with a subscription model for organizations across various industries. While the likes of ChatGPT have been dominating the news in the Artificial Intelligence (AI) space, Docebo stock has already been harnessing the power of AI for years.
Its learning management system software became the primary growth driver for the company during the pandemic. With all the restrictions enacted to curb the spread of COVID-19, companies were forced to implement a work-from-home structure.
This development benefitted Docebo, increasing the demand for its software solutions. As with most stocks that capitalized on the WFH situation, entering the post-pandemic era resulted in Docebo stock’s share prices declining. However, it may have the potential to deliver more growth down the line.
As of this writing, Docebo stock trades for $50.97, reflecting a 54.05% decline from its September 2021 all-time high. Many believe that the WFH trend may continue increasing in the coming years, offering Docebo the long-term tailwind it needs to deliver stellar wealth growth.
A period of economic expansion amid declining interest rates can trigger a substantial uptick for these two growth stocks.
A word of warning: Stock market investing is inherently risky, and allocating money to growth stocks is even more so. With the fears of a recession hitting the economy, the risk is even higher. However, the greater the risk, the greater the reward.
If you have a well-balanced portfolio and have some money you can afford to lose, you can consider investing in TELUS International stock and Docebo stock.