While economic uncertainty poses challenges, top Canadian stocks with solid fundamentals will likely outperform the TSX and deliver outsized returns over the next 20 years. Thankfully, several high-quality Canadian stocks are trading at a discount, providing an excellent opportunity for investors to buy these top stocks cheap and gain from the appreciation in their values over time.
So, if you can spare $3,000, I’ll discuss three TSX stocks with the potential to deliver multi-fold returns in the coming years. These stocks have made their investors rich and have multiple catalysts to fuel the rally in their prices.
A high-growth defensive stock
With its high-growth and defensive business model, Dollarama (TSX:DOL) is a solid stock to own for the next 20 years. It sells a wide variety of products, including consumables, at low- and fixed-price points, making it a go-to place for consumers in all market conditions.
Thanks to its recession-resilient business and high growth (its top and bottom line are growing at a double-digit rate), this Canadian value retailer’s shares have outperformed the broader market by a significant margin. Dollarama stock has gained about 98% in three years, reflecting an average annualized return of over 25%.
Dollarama is poised to benefit from its capital-efficient business model (lean operations), direct sourcing, and compelling value at multiple and low fixed-price points. In addition, its extensive store base (presence in all Canadian provinces) and expansion in international markets augurs well for growth.
A fast-growing financial services company
Shares of Canada’s leading non-prime consumer lender, goeasy (TSX:GSY), are a must-have for growth and income in the long term. The financial services company has been growing rapidly. For instance, its revenue and earnings sport a CAGR (compound annual growth rate) of 20% and 27%, respectively.
Thanks to its stellar growth, goeasy stock has gained substantially in value and made a significant amount of money for its shareholders. goeasy stock has increased at a CAGR of 33% in the past three years (including the recent pullback), reflecting an overall gain of over 135%.
While goeasy has outperformed the TSX, it has the potential to deliver multi-fold returns in the coming years. Its high-quality loan originations, solid credit quality, efficient underwriting, and operating leverage could drive its top and bottom line at a double-digit rate over the next several years. Also, goeasy’s growing earnings base positions it well to boost its shareholders’ value through higher dividend payments.
A top-quality fashion house
Lifestyle apparel company Aritzia (TSX:ATZ) is an attractive long-term bet. This fashion house has been consistently delivering stellar sales. Moreover, it runs a profitable business. Given the strong demand for its offerings, Aritzia stock has more than doubled in three years.
To be precise, Aritzia stock gained over 118%, reflecting a CAGR of close to 30%. However, the stock has witnessed a sharp drop following the announcement of fourth-quarter financial results. The company’s margins took a hit due to the inflationary headwinds and additional warehousing costs. Further, its fiscal 2024 sales growth guidance of 10-14% disappointed investors.
Despite the near-term challenges, Aritzia’s business model remains strong, with solid long-term growth prospects. The company is up against tough year-over-year comparisons amid a weak macro environment.
Overall, the strong demand for its products, new boutique openings, expansion in the U.S., and investments in e-commerce will likely accelerate its growth and drive its share price higher.
