Investors planning to start investing for long-term financial goals such as retirement could consider allocating a significant portion of their savings to stocks. Notably, stocks have provided higher returns compared to other investment options in the long term, thereby aiding investors in building wealth over extended periods.
However, not all stocks will likely generate above-average returns. Thus, one should concentrate on investing in the shares of fundamentally strong companies with good growth prospects and the ability to deliver profitable growth in the long term.
Fortunately, the TSX boasts several such stocks that have resilient business models and have consistently outperformed the broader markets with their returns. Against this backdrop, let’s explore three Canadian stocks that can potentially generate solid returns in the long term. Investing in these gems and holding onto them for the long term could pave the way for a prosperous retirement.
Celestica
Celestica (TSX:CLS) stock has skyrocketed over the past year, gaining nearly 251%. The company’s diversified portfolio, exposure to high-growth end markets, and resiliency of its business position it well to deliver sustainable revenue and profitability over the long term.
The company will likely benefit from the strength in its Connectivity & Cloud Solutions (CCS) business, which accounts for the majority of its revenues. The widespread deployment of artificial intelligence computing capacity presents substantial growth prospects for the company in the long run. Additionally, Celestica is well positioned to leverage the robust networking demand from Hyperscaler, further enhancing its growth potential.
Additionally, Celestica’s Advanced Technology Solutions (ATS) segment is well-poised to seize opportunities arising from the shift towards electric vehicles, smart energy solutions, and telematics. In summary, Celestica is strategically positioned to capitalize on technology transitions, enabling it to deliver stellar returns in the long term.
goeasy
goeasy (TSX:GSY) is another top stock to create wealth in the long term. Shares of this financial services company that offers lending services to subprime borrowers have grown at a compound annual growth rate (CAGR) of about 27% over the past decade, delivering capital gains of about 1,000%. In addition, goeasy enhanced its shareholders’ returns through higher dividend payments.
goeasy stock’s outperformance stems from its ability to consistently increase its revenue and earnings at a double-digit rate. Its top and bottom lines sport a CAGR of 17.7% and 29.5%, respectively, between 2012 and 2022. Moreover, its revenue and earnings increased at a CAGR of 19.8% and 31.9%, respectively, in the past five years (as of December 31, 2023).
The company’s growing consumer loan portfolio, large addressable market, geographical expansion, omnichannel offerings, and diversified funding sources will drive its top line. Further, leverage from higher sales, steady credit performance, and efficiency improvements will support its earnings and share price.
Shopify
E-commerce platform provider Shopify (TSX:SHOP) could be a solid addition to your long-term portfolio. While the stock has marked a significant pullback from its COVID-led peak, it is still up about 291% in five years, reflecting an impressive CAGR of 31.3%.
The increasing share of e-commerce in the retail space, Shopify’s strong competitive positioning, and its ability to generate durable revenue even amid a challenging operating environment support my optimistic outlook. Moreover, Shopify stands to benefit from the growing number of active merchants on its platform and potential increases in subscription fees, which should fortify its earnings.
Additionally, Shopify’s emphasis on cost reduction and transition towards an asset-light business model positions it favourably to deliver consistent long-term earnings. Overall, Shopify’s dominant position in the e-commerce landscape, expanding merchant base, rising product adoption, stringent cost management, and improved take rate lay a solid foundation for long-term growth.
