Written by Sneha Nahata at The Motley Fool Canada
To create wealth in the long term, investors must add high-growth stocks to their portfolios. Moreover, investors should look for profitable corporations, as companies with solid earnings bases are more resilient to wild market swings.
Against this backdrop, stocks like Aritzia (TSX:ATZ), goeasy (TSX:GSY), and Dollarama (TSX:DOL) appear to be solid bets near their current levels. These fundamentally strong Canadian stocks are backed by businesses that consistently generate solid financials. Moreover, these companies are profitable and have outperformed the broader markets with their returns in the past. Let’s delve deeper to understand why everyone should own these growth stocks.
Fashion house Aritzia has a stellar track record of delivering high growth. Furthermore, the stock has witnessed a pullback in the recent past, making it a compelling buy near the current levels. The steady increase in the number of boutiques, solid e-commerce business, growing brand awareness, expansion in the U.S., and focus on cost savings are why Aritzia consistently delivers strong financials, which drive its stock price higher.
For instance, Aritzia’s net revenue sported a compound annual growth rate (CAGR) of 26% between fiscal 2019 and 2023. During the same period, adjusted net income grew at a CAGR of 23%. The company’s management remains upbeat and projects net revenue to grow at a CAGR of 15-17% through 2027. Higher sales and operating leverage will likely cushion its bottom line.
This growth will be supported by its growing portfolio of boutiques. The company plans to more than double its presence in the U.S. and steadily grow its Canadian base. Meanwhile, strength in the e-commerce channel, customer loyalty, and full-price selling augur well for growth.
Next up is goeasy. This financial services company is known for delivering solid growth regardless of market conditions. Between 2012 and 2022, this sub-prime lender has grown its top line at a CAGR of 17.7%. During the same period, its adjusted earnings per share (EPS) increased at a CAGR of 29.5%. Moreover, in the past five years, goeasy’s top line has sported a CAGR of 19.4%, while its EPS increased at a CAGR of 31.9%.
As we advance, goeasy is poised to deliver stellar revenues supported by its high-quality loan originations and expanded product base. Meanwhile, steady credit performance and operating efficiency will continue to cushion its bottom line.
Furthermore, the company’s growing earnings base will enable it to boost its shareholders’ returns through higher dividend payouts. The stock has gained over 22% year to date. However, it is still trading at a discounted valuation from its highs, making it an attractive investment near the current levels.
Like goeasy, Dollarama has generated impressive growth and returns in the past decade. The retailer sells a wide range of products at low fixed-price points, which drives traffic and supports its financials regardless of the economic situation. Besides value pricing, the expansion of its store base supports its top-line growth.
Dollarama’s higher sales and focus on productivity drive earnings and dividend payments. Notably, the company has increased its dividend annually since 2011, which enhances shareholders’ value.
Its low-risk and resilient business model, growing store base, value pricing, and focus on efficiency initiatives will likely drive its top and bottom lines. At the same time, the company could continue to boost its shareholders’ returns through increased dividend payments.
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 26 percentage points.*
They just revealed what they believe are the 5 best stocks for investors to buy right now… and Aritzia made the list -- but there are 4 other stocks you may be overlooking.
See the 5 Stocks * Returns as of 8/16/23