1 Growth Stock Down 9 Percent to Buy Right Now

Buying a growth stock just because it’s discounted might not be the wisest investment decision. You should also look into its fundamentals and recovery potential.

| More on:
Upwards momentum

Image source: Getty Images

It’s easy to choose discounted stocks when the market is bearish during a market crash or a sector-wide crash. That’s because the “force” and factors behind the discount are pretty apparent. Investors may wait before buying their favourite stocks. Still, the wait is more about getting the timing right, ideally just before the recovery begins, than it’s about assessing the stock itself.

However, when a stock, especially a growth stock, starts going down when the market is bullish, it’s natural to be wary about buying it and taking advantage of the discount. That’s the case with Clairvest Group (TSX:CVG).

The stock

Clairvest Group is currently trading for $70 per share and has a market value of about $1 billion. That represents a 9% discount from the beginning of this year and a 15% discount in the last 12 months.

The size of the slump itself is not a problem, as the stock has fallen harder than that multiple times in the previous five years, but in most of those instances, the drop was far sharper and did not spread out over a year.

Even with this discount in place, the stock has returned about 45% in the last five years. At this pace, it may help you double your capital in the next 12 years or so. This is a relatively slower representation of its long-term growth potential because if we look further back, the stock has risen by about 190% in the last 10 years.

The company

Even though the reasons behind this relatively slow and modest slump aren’t clear, the company looks healthy. It has a history of raising capital at a rapid pace, which is a strong reflection of its good reputation and standing within the industry, considering the relatively modest performance of other equity firms. It has almost no debt and about $144 million in cash and investments.

The company has made multiple acquisitions and exits in the past two or three years. Some of these acquisitions were by the company itself, and the others were in partnership. Considering Clairvest’s track record, these acquisitions are expected to yield decent returns for its shareholders and may give a strong boost to the company’s financials and standing in the coming years.

Foolish takeaway

While past performance is not a rock-solid evaluation metric for future projections, it wouldn’t be a stretch to say that Clairvest’s long-term prospects are healthy enough, and it may turn things around soon, especially if the next earnings report is more attractive than the last one.

So, buying it now at its modest discount may be a smart thing to do. Once it enters the bull market phase, you may lose the recovery part of the growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dividend Stocks

10 Years From Now, You’ll Be Glad You Bought These Magnificent TSX Dividend Stocks

The TSX is lucrative to buy these magnificent dividend stocks in bulk and be proud of this decision 10 years…

Read more »

calculate and analyze stock
Dividend Stocks

4 Fabulous Dividend Stocks to Buy in July

Are you looking for long-term income? These four dividend stocks should not only provide you with value in July but…

Read more »

financial freedom sign
Dividend Stocks

5 Steps to Financial Freedom for Canadian Millennials

Follow these steps and nothing can stop Canadian millennials from achieving their early retirement dreams.

Read more »

Investor wonders if it's safe to buy stocks now
Dividend Stocks

We’re Only Getting Older: A Top TSX Stock That Benefits From an Aging Population

For a bet on the aging population, consider this small-cap stock with growth potential.

Read more »

Growing plant shoots on coins
Dividend Stocks

Yield Today, Growth Tomorrow: 3 Stocks to Keep Building Your Wealth

For investors seeking yield today and growth tomorrow, these top Canadian dividend stocks are certainly worth considering right now.

Read more »

Payday ringed on a calendar
Dividend Stocks

This 10.72% Dividend Stock Pays Cash Every Month

This dividend stock remains a consistent, defensive dividend producer that will give up over 10% in income each and every…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA Investors: 2 Standout Domestic Stocks With 7% Yields

These top dividend-growth stocks look oversold.

Read more »

Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Despite their recent declines, the long-term growth outlook of these two top dividend stocks remains strong, which could help their…

Read more »