Do you have an extra $3,000 lying around? Invest it to get your money working for you! Investing in solid growth stocks can make you rich over time, especially if you keep buying their shares at good valuations. Here are a couple of monster growth stocks that are trading at good valuations and are worthy of further research.
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Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) has been a monster growth stock, delivering market-beating returns for investors in the long run. Here’s a graph comparing its returns to the Canadian stock market returns of an initial investment of $10,000 over a decade. For Couche-Tard, it was a return of north of 17% per year versus the Canadian stock market (using iShares S&P/TSX 60 Index ETF as a proxy) return of 8% per year.
>ATD Total Return Level data by YCharts
As a global convenience store consolidator with most locations encouraging repeat foot traffic from offering road transportation fuel, it makes quality and resilient earnings through the ups and downs of the economic cycle. In fact, during the pandemic, people had an affinity for convenience as its adjusted earnings per share (EPS) jumped 22% in fiscal 2020. During the global financial crisis, although its adjusted EPS dropped 11% (which was still resilient) in fiscal 2008, it came back strongly by rising 65% in the following year.
The growth stock has just experienced a meaningful pullback of almost 15% from its 52-week high, providing a good opportunity for long-term investors to get in. At $74.50 per share at writing, analysts believe it trades at a discount of about 15%.
Although its dividend yield of less than 1% may be too small for your taste, it has a track record of high dividend growth with a 15-year dividend-growth rate of close to 25%. To be sure, its mergers and acquisitions strategy has also supported a five-year dividend-growth rate that’s north of 24%.
Here’s an even crazier monster growth stock that keeps on delivering.
Constellation Software
Constellation Software (TSX:CSU) has been growing at a high rate by acquiring, managing, and building vertical market software businesses. Typically, these businesses provide mission-critical software solutions that address the specific needs of its customers in particular markets, driving quality revenues and earnings. In fact, this strategy has allowed the tech company to make high returns on equity.
For example, Morningstar data indicates that Constellation Software has achieved strong returns on equity of over 29% every year since 2014, making its long-term investors rich in the process. In the last 10 years, the tech stock transformed an initial investment of $10,000 into $128,260, equating to total returns of just over 29% per year!
Its stock price is also persistently going higher with little setbacks, as management has been superb in running the company and delivering strong results. It’ll be difficult to capture shares at a discount. At about $3,754 per share, analysts believe the stock is fairly valued.
Interested investors who like the business but find the stock price to be too high can consider investing on commission-free trading platforms like Wealthsimple, which also allows the purchase of partial shares. So, essentially, you can invest as little or as much as you like at a time. This also allows investors to use a dollar-cost averaging strategy to build a long-term position in a strong stock like Constellation Software.
