2 Super Growth Stocks Down 34% and 61% to Buy on the Dip

While I don't typically wait for a stock to dip in price to buy it, it can be an excellent opportunity to add to a holding -- provided my original investment thesis remains intact.

Following the market's recent sell-off, many of my favorite stocks have dropped significantly. However, I'd argue there's nothing existentially wrong with most of these businesses. Many of these stocks were priced for perfection by the market and failed to meet the lofty expectations that analysts had hoped for. They're far from broken businesses.

Today, I'll examine two examples of businesses facing this phenomenon and explain why these two growth stocks appear to be super buy-the-dip candidates.

1. The Trade Desk

The Trade Desk (NASDAQ: TTD) is a data-driven digital platform for ad buyers, whether they are brands themselves or their publishers.

The Trade Desk's leading platform operates independently on the buy-side -- as opposed to the walled gardens of Alphabet, Meta Platforms, and Amazon -- granting it a level of subjectivity its mega peers can't match. These behemoths tend to keep their precious data in-house, limiting transparency for advertisers trying to maximize their marketing effectiveness.

Powered by this independence and subjectivity, The Trade Desk has become an 18-bagger in the 10 years since it went public. What makes this stock's performance even more incredible is that these results include The Trade Desk's 61% pullback from its highs over the last year.

Typically, dramatic sell-offs like this hit struggling businesses or companies that have lost their grip on a leadership position. However, in The Trade Desk's case -- and the case of the other stock in this article -- the drop stems from not being able to live up to a lofty valuation that demanded perfect results.

Over the last decade, the company has traded at an average of 82 times free cash flow (FCF). This valuation is nearly three times the average of the S&P 500 over the same time. So when The Trade Desk reported quarterly earnings that fell short of management's internal guidance for the first time in 33 quarters, its shares were swiftly punished.

Despite this miss, The Trade Desk still grew sales by 26% in 2024 and is guiding for a 17% increase in the first quarter of 2025. Though this is a deceleration in growth, it is still nearly double the broader ad industry's projected growth rate, showing that the company is still taking market share.

The Trade Desk only holds roughly 1% market share of the soon-to-be $1 trillion advertising industry, so its growth story is way too young to give up on, in my opinion. Since the company is already a leader in the connected-TV ad space -- and poised to become one in audio following a partnership with Spotify -- investors need to remember The Trade Desk's decades-long potential and not get distracted by 90 days' worth of subpar data.

With The Trade Desk valued at 43 times FCF -- a valuation it has only seen briefly in 2016, 2018, and 2022 -- I'll happily continue buying shares of the ad technology juggernaut as it continues to grow its market share.

2. SPS Commerce

SPS Commerce (NASDAQ: SPSC) offers cloud-based solutions that connect retailers, suppliers, and logistics providers on one unified collaborative network. Whether it's helping with fulfillment, analytics, assortment, or omnichannel operations, SPS Commerce is quietly transforming the global retail supply chain and has become a leader in the space.

While investors may need to take a leap of faith to consider a stock like SPS Commerce, thanks to the labyrinthine nature of the retail supply chains it helps solve, the company's stock performance and accolades speak for themselves.

A 20-bagger since 2016, SPS Commerce has seen its revenue grow 17-fold over the same period. Meanwhile, Forbes put SPS Commerce on its 2024 list of America's Best Companies, highlighting the top-tier business behind the company's outperforming stock. Similarly, business software reviewer G2 listed it as its top-rated electronic data interchange (EDI) offering, further highlighting the company's leadership position in its supply chain niche.

Thanks to these promising attributes, SPS Commerce has consistently maintained a lofty valuation, trading at an average price-to-FCF (P/FCF) of roughly 63 since 2010. Subject to this premium valuation, however, the company's shares have dropped 35% from their highs after it offered slightly less-than-perfect guidance for 2025.

With the company increasing revenue by 21% in the first quarter and reiterating 20% sales growth in 2025, this sell-off seems unwarranted in my opinion. This notion is especially true considering SPS' track record as a serial acquirer.

The company has acquired more than a dozen smaller companies since 2010. Whether adding a company like Carbon6, a revenue recovery specialist for Amazon sellers, or TIE Kinetix, an EDI provider in Europe, SPS Commerce aims to expand both its product suite and geographic reach.

Home to an above-average cash return on invested capital (ROIC) of 18%, the company has proven capable of generating oversized cash flows compared to the debt and equity it uses to fund acquisitions.

After growing sales for 97 straight quarters -- with 94% of its revenue recurring in nature -- and sitting at the center of a megatrend that sees retailers shifting toward complex omnichannel operations, SPS Commerce has a lot to offer investors.

Now trading at 38 times FCF (its cheapest level since the 2020 crash), SPS Commerce appears to be a classic case of a premium business trading at a fair price.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Josh Kohn-Lindquist has positions in Alphabet and The Trade Desk. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Spotify Technology, and The Trade Desk. The Motley Fool has a disclosure policy.