Despite the recent stock market rally, several TSX growth stocks are trading well below record highs, allowing you to buy the dip. Here are three such TSX stocks trading at an absurd discount that are well poised to deliver outsized gains to shareholders in the long term.
Docebo stock
An enterprise-facing e-learning company, Docebo (TSX:DCBO) is valued at a market cap of $1.5 billion. Down 60% from all-time highs, analysts expect DCBO stock to surge over 40% in the next 12 months.
Docebo is expanding its artificial intelligence capabilities and recently acquired Edugo.AI, a company that uses large language models and algorithms to optimize learning paths to adapt to individual learning requirements.
Docebo increased sales by 29% year over year to $41.5 million in the first quarter (Q1). Subscription sales accounted for 94% of total revenue, providing investors with visibility into Docebo’s top line. It ended Q1 with annual recurring revenue of $165 million, an increase of 28% compared to the year-ago period.
Docebo’s products are used by 3,506 customers indicating an annual contract value of over $47,000. With a gross margin of over 80%, Docebo is positioned to benefit from economies of scale. Analysts expect sales to rise from $191 million in 2022 to $300 million in 2024.
Well Health stock
A company that has aggressively expanded on the back of several accretive acquisitions, Well Health (TSX:WELL) stock has already surged 5,000% since its initial public offering in April 2016. Down 44% from its peak, Well Health stock is priced at less than two times forward sales, which is quite cheap.
It increased sales by 34% year over year in $169.4 million, while adjusted earnings before interest, tax, depreciation, and amortization grew by 14% to $26.7 million in Q1 of 2023.
Last month Well Health acquired five multi-disciplinary primary clinics located in Calgary that offer a range of primary care services. The acquisition will allow Well Health to onboard 50 physicians to its rapidly expanding ecosystem.
Bay Street expects WELL stock to surge over 50% in the next 12 months.
Aritzia stock
The final TSX stock on my list is Aritzia (TSX:ATZ), which is valued at a market cap of almost $4 billion. A vertically integrated design house, Aritzia is fast gaining traction south of the border, which is also the world’s largest economy.
In fiscal 2023 (which ended in February), Aritzia increased sales by 47% year over year. Its revenue originating from the U.S. soared by 66%, accounting for 50% of total sales. While e-commerce sales were up 36%, retail sales grew 53% in the last 12 months.
Aritzia opened eight new boutiques in Q4 and repositioned five existing boutiques in premier real estate locations. The payback period for each of these boutiques is tracking well ahead of expectations.
Investors might worry about the company’s narrowing profit margins and rising inventory levels. For instance, inventory more than doubled to $467.7 million in Q4, but Aritzia explained it is building stock to meet unprecedented consumer demand and mitigate supply chain risks.
Priced at 24 times forward earnings, ATZ stock is also trading at a discount of 50% to consensus price target estimates.
