The Canadian stock market has trended higher despite macro uncertainty. This resilience shows investors’ confidence in the economy, expectations of solid corporate earnings, and optimism over potential rate cuts and artificial intelligence (AI) technology.
Thanks to the investors’ growing risk appetite, several Canadian stocks have gained significantly in value. Nonetheless, a few fundamentally strong stocks still appear attractive investments near their current market price.
goeasy
So, if you’re planning to invest $3,000 in August, here are three Canadian stocks poised to deliver above-average returns.
Up about 29% year-to-date and 320% in the past five years, goeasy (TSX:GSY) stock has consistently delivered above-average returns and outperformed the broader equity markets. This stellar growth in goeasy stock is led by its ability to generate stellar revenue and earnings in all market conditions.
For example, this subprime lender’s revenue sports a compound annual growth rate (CAGR) of over 20% in the last five years. Moreover, its earnings per share (EPS) grew at a CAGR of over 30% during the same period. The financial services company will release its second quarter (Q2) 2024 results after the market closes on Thursday, August 8. I believe the momentum in its business will likely sustain in Q2, which will likely boost its share price.
goeasy will benefit from the large subprime lending market. Higher loan originations and strength across all customer acquisition channels will drive its revenue. Furthermore, goeasy’s solid credit underwriting capabilities and operating efficiency bode well for profitability.
While goeasy has gained significantly, its stock trades cheap on the valuation metric. For instance, goeasy stock is trading at the next 12-month price-to-earnings (P/E) multiple of 11.2, which is low considering its high EPS growth rate and decent dividend yield. In summary, goeasy’s attractive valuation and potential for solid growth make it a compelling investment choice.
Dollarama
Investors could consider buying shares of Dollarama (TSX:DOL) in August for growth, stability, and income. The discount retailer has consistently generated solid sales and earnings thanks to its relatively resilient business model and ability to drive traffic with its strategic pricing.
Thanks to its strong financials, Dollarama stock is up over 37% year-to-date and has gained over 802% in the past decade, beating the benchmark index by a wide margin. The retailer has also raised its dividend 13 times since 2011, enhancing its shareholders’ returns through higher dividend payments.
In the future, Dollarama’s value pricing strategy, new store openings, and growing digital footprint will drive its top line. Further, leverage from higher sales, direct product sourcing, and focus on efficiency will cushion its earnings and dividend payments and drive its share price higher.
Celestica
Celestica (TSX:CLS) could be a solid addition to your portfolio in August 2024. While Celestica stock has gained over 147% in one year, it has witnessed a pullback and is down about 14% in one month, providing a good entry point for long-term investors.
The company provides design, manufacturing, and supply chain solutions and has delivered solid growth in the past, which has led to a rally in its share price over the past one and a half years.
The company is poised to benefit from its exposure to high-growth sectors, such as EVs and artificial intelligence (AI). The growing adoption and deployment of AI computing will likely drive demand for Celestica’s offerings and support its growth.
Moreover, the ongoing strength in the commercial aerospace submarkets is positive. Celestica will also benefit from the re-acceleration in EV demand and ongoing shift towards clean and smart energy.
