One of the fundamental tenets of creating wealth or achieving your financial goals would be staying invested over the long term. Investors can minimize the impact of short-term volatility and harness the power of compounding through their long-term investments. However, they should be careful while choosing stocks and invest in those with solid underlying businesses and healthy growth potential. Meanwhile, here are my three top long-term buys in Canada.
Dollarama
Dollarama (TSX:DOL) is a discount retailer with an extensive presence across Canada. It operates 1,525 stores, with around 85% of Canadians having at least one store within 10 kilometres. Through its direct sourcing capabilities and efficient logistics, the company is able to deliver its products at a compelling value to its customers. Due to its quicker sales ramp-up, the payback period for its new stores is less than two years, while the average sales for stores opened within two years stands at $2.9 million.
Supported by these solid operating metrics, the discount retailer has delivered double-digit top- and bottom-line growth for the previous 12 years. Given its growth initiatives, I expect the upward momentum to continue. The company expects to add 475 new stores to increase its count to 2,000 by the end of 2031. Meanwhile, Dollarcity, in which the company owns a 50.1% stake, has also planned to increase its store count to 850 by 2029 compared to 458 at the end of the second quarter of fiscal 2024.
Further, Dollarama is strengthening its direct sourcing capabilities and expanding its digital footprint to improve customer value and convenience, which could continue to drive its same-store sales growth. Considering its healthy outlook, I believe Dollarama would be an excellent long-term bet.
Nuvei
Another stock with compelling long-term growth prospects would be Nuvei (TSX:NVEI), a payment processing company that allows its clients to accept next-generation payment methods. It operates in over 200 markets, supporting 150 currencies and 634 alternative payment methods. However, the company has been under pressure this year following weak quarterly performance and the slashing of its guidance. It has lost around 35% of its stock value this year.
Nonetheless, I believe the steep pullback offers an enticing entry point for long-term investors. Amid the correction, Nuvei trades at 1.8 times analysts’ sales projections for the next four quarters, which looks cheap given its high-growth prospects. Mordor Intelligence projects the global digital payment market to grow at an annualized rate of 11% over the next five years.
As a player in this growing addressable market, the digital payment processor aims to introduce innovative products, expand its market reach, and increase its APM (alternative payment methods) portfolio to drive growth. Considering its healthy outlook and attractive valuation, I expect Nuvei to deliver multi-fold returns over the long run.
Waste Connections
Waste Connections (TSX:WCN) would be my final pick. The third-largest solid waste management company has delivered impressive returns of 594% at a CAGR (compound annual growth rate) of 21.4% for the last 10 years. Its solid underlying businesses and strategic acquisitions have driven its financials and stock price. With the company operating primarily in secondary and exclusive markets, it is able to maintain an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin of over 30% despite its aggressive acquisitions.
Given the essential nature of its business, growing exploration and production activities, continued acquisitions, and favourable rate revisions, I expect the uptrend in Waste Conenctions’s financials to continue. Besides, the company has rewarded its shareholders by increasing its dividend at a CAGR of 15% since 2010. Considering all these factors, I am bullish on Waste Connections.
