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The concept of buying and holding stocks forever resonates with long-term investors looking for stability and continuous growth. Investing in quality stocks for the long term not only provides the benefit of compounding but also allows investors to ride out market fluctuations without worrying about short-term volatility. This is why the Foolish Investing Philosophy places great emphasis on the importance of a long-term approach.
With the TSX Composite Index recently breaking records and interest rates trending downward, the stock market seems ripe for long-term growth opportunities. However, finding growth stocks that don’t look overbought could be a challenge in a market that is reaching new heights. That’s why you want to highlight two underperforming but fundamentally strong growth stocks you can consider buying now and expect strong returns on your investments in the long run.
Lightspeed stock
Lightspeed Commerce (TSX:LSPD) is the first stock on this list that offers tremendous growth potential for long-term investors. After rallying by around 44% in 2023, LSPD stock has seen 19.2% value erosion so far in 2024 to currently trade at $22.59 per share with a market cap of $3.4 billion.
This Montréal-based company mainly focuses on providing one-stop commerce solutions to retail, hospitality, and e-commerce businesses across the globe. It’s also important to note that Lightspeed recently confirmed that it’s conducting a strategic review of its business and exploring potential alternatives to maximize its value for shareholders.
Despite facing global economic challenges, Lightspeed is continuing to post strong financial results. In the 12 months ended in June 2024, the company’s total revenue rose 26.2% YoY (year over year) to US$966.3 million as the demand for its payment solutions continued to surge.
On the profitability side, LSPD’s adjusted net profit for these 12 months stood at US$42.9 million compared to a loss of US$9.7 million in the prior period. Given its strong financial growth trends and long-term growth potential, recent big declines in LSPD stock make it look undervalued to buy for the long term.
Magna stock
Magna International (TSX:MG) is another Canadian growth stock that I find really attractive at current levels. This Aurora-headquartered company has a strong presence in the global automotive industry, supplying components, systems, and complete vehicle assemblies to some of the largest automakers in the world. It currently has a market cap of $16.7 billion as its stock trades at $57.75 per share with nearly 26% year-to-date losses.
In the trailing 12 months, Magna’s revenue grew positively by 6.4% YoY, and its adjusted earnings climbed by 13.7%. Despite ongoing macroeconomic challenges and weak consumer spending, the company’s diversified product portfolio has helped it weather the storm and maintain growth.
Although a recent weakness in the demand for electric vehicles (EVs) has affected its earnings in recent quarters, Magna’s seems well-positioned to benefit from a long-term shift towards EVs and autonomous vehicles. Considering this, the recent declines in its share prices could be an opportunity for long-term investors to buy this top growth stock at a big bargain.