Equity markets are volatile in the near term but provide investors an opportunity to generate game-changing returns over time. It suggests investors should be equipped to stomach massive drawdowns in equity valuations during bear markets to benefit from outsized gains when market sentiment improves.
Here are three growth stocks to buy before the next bull market arrives.
Shopify stock
One of the most popular tech stocks in Canada is Shopify (TSX: SHOP). Currently down 55% from all-time highs, Shopify stock has returned over 3,000% to shareholders since its initial public offering in 2015.
Despite a sluggish macro environment in 2023, Shopify increased sales by 25% year over year to US$1.7 billion in the third quarter (Q3), driven by a 22% growth in GMV, or gross merchandise volume,, which grew to US$56.2 billion.
While Shopify has struggled to generate consistent profits in the past, its gross profit grew 36% to US$901 million in Q3. Moreover, lower operating expenses allowed it to end the September quarter with an operating income of US$122 million.
Shopify emphasized a significant portion of its revenue growth is derived from initiatives including payment processing and subscription sales. It suggests the e-commerce company is positioned to generate stable cash flows as its annual recurring revenue continues to widen.
Priced at 70 times forward earnings, SHOP stock trades at a premium. But it’s also forecast to increase its earnings per share by a whopping 277% annually in the next five years.
Jamieson Wellness stock
Valued at $1.3 billion by market cap, Jamieson Wellness (TSX: JWEL) develops, manufactures, distributes, markets, and sells natural health products, including vitamins and nutritional supplements, in Canada and other international markets.
The company increased sales by 9.1% to $151.5 million in Q3, as strong sales in the Jamieson Brands segment in China and the U.S. drove top-line growth.
Jamieson emphasized consumption in Canada outpaced shipments. Further, new product launches, e-commerce, and distribution gains in the U.S. drove revenue growth for the youtheory brand, while growth in international markets was led by product innovation and marketing.
Priced at 16 times forward earnings, JWEL stock trades at a discount of 28% to consensus price target estimates.
TFI International stock
The final TSX growth stock on my list is TFI International (TSX: TFII), which provides transportation and logistics services in the U.S., Canada, and Mexico. Valued at $ 13.4 billion by market cap, TFII stock has returned over 4,000% to shareholders in the past two decades after adjusting for dividends.
Despite its market-thumping gains, TFII stock is priced at 15 times forward earnings, which is not too steep. Analysts expect difficult macro conditions to result in a 14.4% decline in sales for TFI International this year. However, it is forecast to increase sales by 8% and earnings by 26% year over year in 2024.
Additionally, the company also pays shareholders an annual dividend of $1.88 per share, translating to a yield of 1.2%, which is not that attractive. But these payouts have risen by 8.5% annually in the last 18 years, increasing your effective yield over time.
Given consensus price targets, TFII stock trades at a discount of 8% right now.
