Image source: Getty Images
Despite concerns about rising inflation and the impact of the Russian-Ukrainian war and subsequent sanctions on global growth, the S&P/TSX Composite Index increased by 3.14% in the first quarter of this year. However, tech stocks sold off amid expectations of interest rate hikes and growth normalizing after the economy reopens. However, I think the sell-off of the following three stocks is overdone, providing excellent buying opportunities.
Goodfood Market (TSX:FOOD) had experienced substantial growth during the pandemic amid growing demand for online delivery of groceries and meal kits. However, fear of slower growth as the economy reopens drove the company’s share price lower. It is currently trading 74.3% below its 52-week high.
In the meantime, I think the sharp pullback offers excellent buying opportunities, given its healthy growth outlook and attractive price-to-sell ratio of 0.6. Despite the easing of pandemic-related restrictions, I expect demand for online grocery delivery services to continue. The company is building 20 micro-distribution centers to strengthen its infrastructure. Its management expects these fulfillment centers to scale its network of on-demand grocery and meal solutions.
The broadening of the product offering, the strengthening of its production capacities and the geographic expansion bode well for its growth. So at these reduced levels, I’m bullish on Goodfood Market.
Dye and Durham
Second on my list is Dye and Durham (TSX:DND), which has lost nearly 50% of its market value from its 52-week high. Along with weakness in tech stocks, investors feared that the sharp rise in prices for its products and services could lead to higher churn. Amid the pullback, the company is trading at an attractive NTM (next 12 months) price-earnings multiple of 12.7.
Meanwhile, its improving finances, expanding customer base, growing recurring revenue and strategic acquisitions bode well for its growth. After having acquired from TELUS A financial solutions business, the company is working to close the Link Group deal for $500 million. Building on these acquisitions, management expects its adjusted EBITDA to reach $794 million by 2024, representing annualized growth of nearly 90% over the next three years. So, given its healthy growth potential and attractive valuation, I expect Dye & Durham to offer superior returns in the short to medium term.
My last choice is Docebo (TSX:DCBO)(NASDAQ:DCBO), which provides e-learning solutions for businesses. More and more organizations are adopting digital tools to improve the skills of their employees, considering their convenience and cost-effectiveness. Thus, the company’s addressable market is expanding. With its highly configurable platform, the company is well equipped to increase its market share.
Its growing customer base, rising average revenue per customer, and higher percentage of recurring revenue could support its growth. Over the past six years, the company has grown its customer base at a CAGR of 20% while quadrupling its average revenue per customer. It derives around 92% of its total revenue from recurring sources, which is encouraging. Despite this good growth outlook, the company is trading at a 45% discount to its September highs. So I think investors should use the correction to accumulate stocks for higher returns.