Investing in quality growth stocks is a proven strategy for building long-term wealth. While growth stocks deliver outsized gains during bull markets, they also trail the broader indices by a broader margin when sentiment turns bearish. So, it’s essential to identify stocks that are part of expanding addressable markets that allow companies to grow revenue and earnings over time.
The ongoing sell-off allows investors with a higher risk appetite to buy growth stocks at a discount and benefit from outsized gains in the next 12 months. In this article, I have identified two profitable Canadian stocks you can buy right now.
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Is the TSXV stock a good buy right now?
Valued at $10 billion by market cap, Lumine Group (TSXV:LMN) offers communications and media software globally. The company’s revenue increased from US$166.4 million in 2020 to US$668.4 million in 2024. With gross margins of 92.2% and an operating margin of 15.3%, the TSX stock is profitable and will remain a top investment in 2025.
Earlier this month, Lumine announced its fourth quarter and full-year 2024 financial results. Revenue increased 31% to US$187.1 million for the fourth quarter (Q4), compared to US$143.1 million in the same period last year. The communications and media software specialist reported a significant improvement in operating income, which grew 65% to US$68.7 million.
Lumine swung to a net income of US$29.4 million in Q4 — a dramatic improvement from a US$1.5 billion loss in the same quarter of 2023. Cash flows from operations nearly doubled to US$52.3 million, while free cash flow available to shareholders increased 115% to US$43.7 million.
Acquisitions primarily drove revenue growth, as Lumine faced a 9% organic decline after adjusting for foreign exchange impacts. Despite the organic growth challenges, Lumine’s acquisition model yields positive financial results.
The company specializes in acquiring diverse communications and media software businesses that typically maintain low customer churn due to their mission-critical nature and have well-diversified customer bases to reduce dependency on any single client.
Analysts remain bullish on the tech stock and expect it to gain around 20% in the next 12 months.
Is the TSX stock undervalued?
In Q3 of 2024, Cipher Pharmaceuticals (TSX:CPH) reported a 71% increase in revenue, with sales rising to $10.4 million. The growth was primarily driven by its late July acquisition of Natroba.
Product revenue surged 213% to $9.3 million for the quarter, with Natroba and its authorized generic contributing $5.5 million. The company’s leading Canadian acne treatment, Epuris, continued to perform strongly, with revenue increasing 32% to $3.4 million as market share grew to 50.3% from 46.1% a year earlier.
Interim chief executive officer Craig Mahl highlighted Cipher’s strategic integration of the Natroba business, noting temporary sales impacts during Q3 as it transitions away from a prior co-promotion partner.
The acquisition establishes a North American platform for Cipher’s expansion strategy, with plans to out-license Natroba globally and introduce it to Canada. In October, Cipher appointed Dr. Hamed Ghani as Chief Business Officer to support these growth initiatives and drive business development activities.
Cipher ended the quarter with $9.5 million in cash and $40 million drawn from its new $65 million revolving credit facility with National Bank, which was partially used to fund the Natroba acquisition.
Analysts expect Cipher to increase revenue from $21.1 million in 2023 to $50 million in 2025. Its adjusted earnings are forecast to grow from $0.47 per share in 2024 to $0.69 per share in 2025. So, priced at 17 times forward earnings, the TSX stock trades at a 40% discount to consensus estimates.
