2 Monster Growth Stocks to Buy Right Now

The S&P 500 has seen several market crashes over the last two decades, but the index still climbed 324% over that period, which is equivalent to an annualized return of 7.5% -- not bad. But over the same period, growth stocks in the S&P 500 have surged 471%, or 9.1% per year. That data makes a strong case for allocating a portion of your portfolio to growth stocks, especially if you still have several decades before retirement.

With that in mind, Docebo (DCBO -2.14%) and PagerDuty (PD -2.67%) should benefit from significant tailwinds in the coming years, and both of these stocks could produce monster returns. Here's what you should know.

Image source: Getty Images.

1. Docebo

Organizations that provide effective learning opportunities typically benefit from higher employee productivity, satisfaction, and retention. That's important, because hiring new talent is costly in terms of time and money. Unfortunately, legacy learning management systems (LMS) tend to be inefficient as they focus exclusively on formal training (i.e. lectures), and a single course often takes over 250 hours to create.

That's where Docebo comes in. This company brings modern technology to the LMS industry, and its platform allows clients to quickly provision and create learning content -- including both formal and social material -- then deliver that content across devices (e.g. desktop, mobile) and analyze its impact on business performance.

For instance, Docebo Shape is a software tool that leans on artificial intelligence to convert corporate resources into training courses, automating what used to be a time-consuming task. Building on that, Docebo Learn uses AI to personalize the learning experience, automatically adjusting content to keep employees engaged.

Finally, the recently launched Docebo Connect supports over 400 integrations, allowing clients to connect Docebo to human resources software like Workday, communications platforms like Zoom, and project management tools like Atlassian's Trello. In short, Docebo makes corporate learning easier and more effective, and that has led to strong demand.

Docebo reported having 2,485 customers in the second quarter, up 22% year over year. And its top line has grown at a steady clip over the last two years.

Source: YCharts. TTM = trailing-12-months. CAGR = compound annual growth rate.

Also noteworthy, Docebo generated $3.3 million in free cash flow over the past year. A small figure, but it's good to see that number break into positive territory.

In the future, management believes e-learning tools will become a core part of corporate operations, much like customer relationship management software has become essential over the last two decades. To that end, the company estimates its market opportunity will be $29.9 billion by 2025 -- more than 360 times its trailing-12-month revenue.

Here's the big picture: Docebo is a founder-led organization with an innovative product and a big market opportunity, yet its market cap sits at just $2.6 billion. Ten years from now, I expect this monster stock to be worth ten times as much.

2. PagerDuty

PagerDuty specializes in digital operations management. Its platform acts as the central nervous system for modern enterprises, collecting signals from software-enabled devices across an organization's digital ecosystem. PagerDuty then leans on artificial intelligence to make sense of those signals, identify issues, and prevent downtime.

In certain situations, its AI-powered software can automatically handle problems, but if that's not possible, PagerDuty orchestrates a human response by alerting the appropriate teams (e.g. customer service, IT) and provisioning each team member with the necessary information. In both cases, this helps enterprises prevent outages in business-critical systems.

PagerDuty was a pioneer in digital operations management, and that head start is still a significant advantage. Its AI models are powered by over 12 years' worth of data, making them uniquely effective, and its platform captures signals from over 600 technologies, more than any other rival. That value proposition has helped PagerDuty grow its business quickly. In fact, over 65% of Fortune 100 companies use its platform.

Source: YCharts. TTM = trailing-12-months. CAGR = compound annual growth rate. Note: fiscal 2022 Q2 ended July 31, 2021.

Investors should note that PagerDuty is currently free-cash-flow negative. The company burned $6.4 million over the past year. But with $547 million in cash and investments on its balance sheet and just $280 million in long-term debt, this is not an immediate problem.

Looking ahead, PagerDuty should benefit from tailwinds like digital transformation and remote work. As more enterprises adopt a digital-first strategy, keeping websites and applications up and running will become even more critical. But orchestrating a response from IT teams or customer service agents is more difficult when those employees aren't working in the office. That's what makes PagerDuty's platform so valuable.

More importantly, PagerDuty pioneered digital operations management, and the company has parlayed its first-mover status into a strong competitive position. To that end, management puts its market opportunity at $36 billion -- almost 150 times its trailing-12-months revenue. And with a market cap of just $3.6 billion, I wouldn't be surprised to see this stock also grow tenfold in the next decade.