Growth stocks have a downside

WeBuyCars' upward trajectory has flattened somewhat with disappointing numbers in earnings growth, although the full picture is yet to emerge later this month

- THE FINANCE GHOST

Car dealership, phone.

(Photos: Freepik)

Growth stocks aren't terribly common on the JSE. Browbeaten South African investors have become accustomed to a cocktail of almost no GDP growth and single-digit earnings growth from most of our companies. We get excited when companies achieve double-digit growth in a year. In the US, there are stocks growing at that rate every three months.

This is why our market features so many stocks trading at high single-digit and low double-digit price-to-earnings multiples. If the market is light on growth expectations, then valuations will be modest, especially in a country where interest rates are high, making fixed-income investments appealing.

Thankfully, there is a handful of local companies that make things more interesting. These growth stocks are either disrupting South African sectors or expanding across multiple high-growth regions.

Either way, investors sit up and pay attention, as these stocks are a rare breed around this part of the world.

And if something goes wrong in the growth story, even just temporarily, the market reverts to a particular brand of pessimism that is as South African as a braai with friends before a Springboks game. WeBuyCars found that out the hard way in the past week.

The WeBuyCars share price shed about a sixth of its value last week. Despite this 16.7% drop in the price, the year-to-date performance is still an increase of 24%. I'm long on WeBuyCars (I've held it since it was cut loose from Transaction Capital), so that's still a great performance in 2025. It's just much less pretty than it used to be.