Most investors know by now that as interest rates continue to decline, there will be ample opportunities for stocks to rally, especially those that have been impacted significantly over the last year as a result of the economic environment. That’s why some of the best stocks to buy now are high-quality growth stocks.
As interest rates rise, many dividend stocks fall in value since the price of stocks is inversely related to interest rates and dividend yields. However, while higher interest rates can significantly impact dividend stocks, they can also heavily affect growth stocks as well. Therefore, with interest rates now declining, many top growth stocks have the potential to see significant recovery rallies.
The reason why growth stocks are impacted so heavily by rising interest rates or why they can benefit so much from falling interest rates is twofold.
First off, many of the highest-quality growth stocks trade with a growth premium. So, as interest rates rise and market sentiment starts to dwindle, these stocks can see significant sell-offs as their growth premiums erode.
Furthermore, higher interest rates also make it more expensive for growth stocks to invest in the future expansion of their operations, not to mention it can also impact profit margins.
Therefore, with interest rates on the decline in both Canada and the United States, top growth stocks are undoubtedly some of the best to buy now.
So, if you’ve got some cash that you’re looking to put to work, here are two of the best growth stocks in Canada to consider adding to your portfolio today.
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A top tech company with significant growth potential
With interest rates now on the decline and many top Canadian stocks on the verge of a rally, one of the best growth stocks to keep an eye on and add to your buy list is VerticalScope Holdings (TSX: FORA).
VerticalScope runs a network of online forums and communities focused on niche topics such as automotive, outdoor activities, and home improvement.
This is an intriguing business model because it allows VerticalScope to generate revenue through several avenues, including digital advertising, user subscriptions, and e-commerce partnerships within these communities, catering to engaged, interest-specific audiences.
By running several different niche communities, VerticalScope consistently attracts advertising dollars since it offers companies highly targeted access to engaged audiences in which nearly everyone in the community is likely a potential customer.
So, given its impressive and intriguing business model, it’s no surprise to see VerticalScope holdings growing rapidly. In fact, analysts estimate its sales will grow by over 11.5% this year.
Furthermore, its earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to grow by more than 20% this year, and it’s expected to generate positive normalized earnings per share for the first time this year as well.
Therefore, with VerticalScope trading well off its highs and at a price-to-sales (P/S) ratio of just 1.7 times, below its three-year average of 2.1 times, it’s certainly one of the best growth stocks to buy in October.
One of the cheapest Canadian growth stocks you can buy today
In addition to VerticalScope, another high-quality growth stock to buy and hold for years is WELL Health Technologies (TSX: WELL), especially while it trades so cheaply.
WELL has been consistently growing its business for years now. However, it’s never fully regained its momentum during the pandemic, which has left the stock ultra-cheap.
Despite its underperforming share price, WELL’s business continues to expand rapidly, thanks primarily to many high-quality, value-accretive acquisitions.
WELL not only has thriving digital health and telehealth businesses, but it’s also the largest owner/operator of outpatient medical clinics in Canada. Furthermore, it’s now seeing significant growth from its investments in AI technology.
So, as WELL continues to execute, expand its operations, and increase its profitability, it’s undoubtedly one of the best growth stocks to buy now, especially when it’s undervalued.
In fact, right now, WELL trades at a forward P/S ratio of just 1.1 times, below its three-year average of more than 1.4 times. Furthermore, its price-to-earnings ratio is just 16.7 times today, which is considerably low for such a high-potential growth stock.
Therefore, while the market environment continues to improve and these two growth stocks trade significantly undervalued, there’s no question they’re two of the best to buy now.
