As many investors know, the current market environment is creating some of the best buying opportunities we’ve seen in years. And while there are many high-quality stocks for growth investors to choose from today, there’s no question that two of the best to buy and hold for the long haul are Alimentation Couche-Tard (TSX:ATD) and Shopify (TSX:SHOP).
Shopify is an exciting business, because it’s one of the leaders in the rapidly growing e-commerce industry. We’ve seen in the past just how quickly it can grow, and the bigger it gets, the better it can scale its costs in order to rapidly boost its profitability.
Plus, Shopify stock has been trading well off its all-time high for over a year now, giving investors an excellent opportunity to buy the stock now and hold it for years.
Couche-Tard, however, is nowhere near as cheap as Shopify. The stock currently trades less than 5% off its 52-week high, and while it has gained 49% over the last two years, Shopify stock has lost 59%.
However, although Couche-Tard stock is not as cheap as Shopify, there’s a good reason for that. Couche-Tard is much more defensive than Shopify and much less impacted by higher interest rates.
Therefore, it’s a more reliable stock in this economic environment. Not to mention, it has a longer track record of more consistent growth.
Therefore, although Shopify stock is cheaper today, let’s look at which stock offers more growth potential in the next two years.
Does Shopify offer more potential than Couche-Tard stock in the near term?
Whether or not Shopify offers more potential than Couche-Tard stock over the next two years depends a lot on how the economy performs.
There’s no question that higher interest rates are not only hurting Shopify’s valuation, but the worsening economic environment in general is certainly impacting discretionary spending and, therefore, revenue for Shopify’s merchants.
Since Couche-Tard is an owner/operator of convenience stores and gas stations, it’s not completely immune to a worsening economy and possible recession, but it’s certainly much more defensive and reliable.
Therefore, if the economy continues to struggle over the next few years, Couche-Tard should continue to outperform Shopify.
However, once the economy and, consequently, the stock market eventually begin to rebound, Shopify could offer enormous growth potential.
Right now, Shopify trades at just 10 times its forward sales — well below its five-year average of 22.4 times.
Not to mention, over the coming years, analysts estimate that Shopify will begin to see a rapid rise in both its earnings before interest, taxes, depreciation and amortization (EBITDA) as well as its earnings per share.
In Couche-Tard’s case, it trades at roughly 17.5 times its forward earnings, which is actually slightly above its five-year average of 17.0 times, showing the increased demand for such a reliable business in this economic climate.
Which is the best stock to buy now?
When you consider both stocks are such high-quality businesses and the fact that it’s so hard to predict when exactly the economy will recover, the best stock to buy now will largely depend on your portfolio.
If you already own a tonne of defensive stocks and want to take advantage of this environment and buy stocks while they’re cheap, Shopify is one of the best to consider.
On the flip side, if you’ve been buying a tonne of stocks that are undervalued and now want a more reliable and defensive investment to help shore up your portfolio, Couche-Tard is an excellent choice.
And, of course, given the quality of both stocks, you could always buy both today. It’s not easy to predict what may happen in the next two years, but buying high-quality stocks and holding for the long haul is one of the best investment strategies that’s been proven time and again.
