It goes without saying that growth stocks are some of the most exciting opportunities on the market. The best growth stocks to buy are companies with the potential to rapidly increase sales, expand margins, and scale their operations, leading to significant long-term gains for investors.
And since growth stocks often trade at a premium, the best time to buy them is when they’re temporarily out of favour and trading at a discount.
That’s what makes cheap growth stocks so appealing. You’re not just betting on the business growing; you’re also getting in at a price that doesn’t fully reflect the company’s future potential. And when the market eventually catches on, you’re positioned for strong capital gains.
It’s essential to be selective, though. Just because a stock is down doesn’t mean it’s undervalued. There’s a big difference between a struggling company and one that’s temporarily misunderstood.
The key is finding real businesses with strong fundamentals, competitive advantages, and clear paths to growth, then buying in while they’re still flying under the radar.
Right now, a handful of Canadian growth stocks check all the right boxes and are trading at incredibly attractive valuations. So, if you’ve got cash that you’re looking to put to work, here are two cheap growth stocks to buy now.
A high-potential healthcare tech stock trading dirt cheap
If you’re looking for a high-potential growth stock to buy while it’s ultra-cheap, there might not be a better stock to consider than WELL Health Technologies (TSX:WELL).
WELL has been growing rapidly since the pandemic. It started out focused solely on healthcare tech businesses and digital health applications, showing an impressive ability to make value-accretive acquisitions and quickly expand its portfolio.
In recent years, though, it has shifted its focus toward acquiring more physical clinics while still leveraging its tech expertise. It targets clinics at reasonable valuations, then immediately applies its operational know-how to improve margins and boost profitability. And with every new acquisition, its economies of scale continue to strengthen.
Today, WELL is the largest owner/operator of outpatient clinics in Canada, and going forward, it plans to begin divesting its U.S.-based business and many of its digital health companies to focus more on operating its reliable and high-growth potential clinic business.
Therefore, while WELL is temporarily cheap, it’s one of the best growth stocks to buy now. Not only is it trading roughly 48% off its 52-week high, but it’s also trading at a forward price-to-earnings ratio of just 9.5 times, which is well below its three-year average of 15 times.
Furthermore, of the 10 analysts covering WELL, nine give the stock a buy rating, with one giving it a hold. In addition, the average analyst target price of $7.45 is nearly double the current trading price of WELL.
So, if you’re looking for high-potential growth stocks to buy while they’re cheap, WELL is easily one of the best to consider.
One of the top Canadian growth stocks to buy while it’s undervalued
In addition to WELL, another incredibly cheap growth stock to buy before it recovers is Cargojet (TSX:CJT).
Cargojet dominates the time-sensitive air cargo space in Canada, an industry that has a tonne of long-term growth potential as e-commerce and online shopping continue to grow in popularity.
Furthermore, the air cargo firm has significant competitive advantages by locking in long-term contracts with major players like Amazon and Canada Post, giving it a reliable base of recurring revenue and strong cash flow. More importantly, it’s the only dedicated overnight air cargo operator in the country, which gives it a scale and speed advantage that’s hard to replicate.
So, despite some near-term headwinds from slower freight volumes as economic uncertainty has ticked up this year, the company continues to have significant growth potential over the coming years.
In fact, of the seven analysts covering Cargojet, six are recommending a buy rating, with the remaining analyst advising a hold. Furthermore, its average analyst target price of $144.29 is a roughly 50% premium to where Cargojet is trading today.
So if you’re looking for a stock to not only buy while it’s cheap but also has years of growth potential, Cargojet is certainly one of the top choices today.
