2 Sensational Growth Stocks You’ll Regret Not Buying on the Dip

These high-growth companies are ripe for the picking after the Nasdaq falls 30% from its peak.

When it comes to the markets, 2021 was undoubtedly a year like no other, and 2022 is vying for the title as well.

Investors this year are being reminded of the harsh lesson that stocks don't always go up. In fact, since hitting their respective highs, the Dow Jones Industrial Average has fallen into correction territory, down 15%, while both the S&P 500 Index and the tech-heavy Nasdaq Composite are both in a bear market, down 20% and 30%, respectively.

The wild volatility and rapid market declines have weighed on investor sentiment this year. But corrections and bear markets can be an ideal time to put your money to work, as each and every noteworthy market decline has been followed by a raging bull market.

As the Nasdaq has fallen, it has taken a number of impressive growth stocks down with it, creating incredible deals in the process. Let's take a closer look at two of them.

1. A global cybersecurity leader ready to (Crowd)Strike

The past couple of years have seen a sharp rise in the number of high-profile data breaches — and it's only expected to get worse from here. Businesses are battling to keep an ever-growing number of hacks, unauthorized intrusions, and ransomware attacks from disrupting their day-to-day operations. That's where CrowdStrike (CRWD) comes in. The company uses a proprietary distributed threat graph that employs state-of-the-art artificial intelligence (AI) to analyze trillions of high-fidelity signals per week to stop intrusions in their tracks. 

The company is the first cloud-native software-as-a-service (SaaS) endpoint security platform, and its cutting-edge services are in high demand. For its fiscal 2023 first quarter (ended April 30), CrowdStrike's revenue climbed 61% year over year, while subscription revenue grew even more quickly, up 64%. This helped annual recurring revenue (ARR) jump 61%, which helps illustrate the company's increasing future potential. 

CrowdStrike isn't yet profitable, but it cut its net loss by more than 63% compared to the prior-year quarter. At the same time, both its cash flow from operations and free cash flow climbed to record territory, which shows that the profits will come as the company continues to build scale.

There's also evidence that CrowdStrike's strong growth will continue. The company's subscription customers increased by 57%, but those adopting four or more, five or more, or six or more modules surged 71%, 59%, and 35%, respectively. This proves that once on board, CrowdStrike's customers expand their relationship and continue to spend increasingly more money on its services. 

Yet for all its high growth, CrowdStrike's stock has followed its tech brethren downward, with the stock price down more than 41% off its recent high. This lets in-the-know investors strike while the iron is hot, getting shares at a significant discount.

2. A special little Snowflake

Given its secular tailwinds and high growth rate, it isn't often investors get the chance to buy Snowflake (SNOW) stock at a discount, but we live in interesting times. The data warehousing, storage, and data analytics specialist has seen its growth boosted by the ongoing digital transformation. What sets the company apart, however, is its ability to break down silos, allowing it to gather and analyze all manner of structured and unstructured data. By using a state-of-the-art combination of machine learning and data science, Snowflake gathers the breadcrumbs that provide businesses with actionable intelligence. Perhaps as importantly, the company provides a usage-based storage model so users pay for only what they need — which has attracted a large and growing cadre of customers.

After generating triple-digit growth last year, investors were expecting a steep deceleration — but that simply wasn't the case. For the fiscal 2023 first quarter (ended April 30), Snowflake's revenue grew 85% year over year, while also expanding its gross profit margin. The company is also moving closer to profitability, and management is forecasting non-GAAP net income for the full fiscal year. Additionally, Snowflake's strong and growing free cash flow shows that its current losses are driven by non-cash items, including depreciation. 

There's also compelling evidence that these impressive results will continue. Snowflake's remaining performance obligation (RPO) — which tracks contractually obligated revenue that isn't yet included in its financial results — grew a whopping 82%. This was fueled by total customers that grew 40% and a net revenue retention rate of 174%. Put another way, Snowflake's existing customers spend 74% more this year compared to last. Additionally, the number of customers that spent more than $1 million in the trailing 12 months grew by 98%, all of which bodes well for Snowflake's future results.

Finally, like many technology stocks, Snowflake has slumped, shedding 64% of its value since its November high, meaning that investors can get all this growth at a significant discount.

Every rose has its thorns

It's important to note that the impressive growth exemplified by these stocks comes at a cost. CrowdStrike and Snowflake are selling at 18 and 22 times forward sales, respectively, when a reasonable price-to-sales ratio is generally between 1 and 2.

However, given that CrowdStrike and Snowflake are generating above-average revenue growth backed by strong customer additions and impressive execution, they don't seem nearly that expensive.

Originally published on Fool.com

Danny Vena has positions in CrowdStrike Holdings, Inc. and Snowflake Inc. The Motley Fool has positions in and recommends CrowdStrike Holdings, Inc. and Snowflake Inc. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.