The slowdown in job growth and higher unemployment rate in the United States have raised recession fears among investors, with the S&P/TSX Composite Index falling 3.82% in the last two trading days. Meanwhile, long-term investors should not be bogged down by short-term volatility and invest in quality stocks to earn oversized returns in the long term. Given their impressive underlying businesses and healthy growth prospects, these three stocks could deliver multi-fold returns in the long run, thus generating substantial wealth for investors.
Dollarama
Dollarama (TSX:DOL) has grown its financials at a healthier rate since 2011. Its revenue and net income have grown at an impressive CAGR (compound annual growth rate) of 11.5% and 18.0%, respectively. Due to its superior direct sourcing abilities and efficient logistics, the company is able to offer a wide range of consumer products at attractive prices, thus allowing it to enjoy healthy same-store sales. It has expanded its store count from 652 in fiscal 2011 to 1,569 by the end of the first quarter of fiscal 2025, boosting its sales.
Meanwhile, the discount retailer continues to expand its footprint and has planned to add around 60-70 stores annually to raise its store count to 2,000 by fiscal 2031. Given its capital-efficient model, quick sales ramp-up, and lower pay-back period, these expansions could boost its top and bottom lines. Further, Dollarama recently increased its stake in Dollarcity, a Latin American value retailer, from 50.1% to 60.1%. Moreover, Dollarcity has planned to add around 500 stores over the next six years to increase its store count to 1,050 by fiscal 2031, thus raising its contribution towards Dollarama.
Further, Dollarama has rewarded its shareholders by increasing its dividends 13 times since 2011. Considering all these factors, I expect Dollarama to continue delivering superior returns in the long run.
goeasy
Second on my list is goeasy (TSX:GSY), a Canadian subprime lender. It has grown its top line and adjusted EPS (earnings per share) at 19% and 28.6% CAGR for the last 10 years. Continuing its uptrend, the company has increased its revenue and adjusted EPS by 24% in the March-ending quarter. Supported by these solid financials, the company has returned around 892% over the last 10 years at an annualized rate of 25.8%.
Despite the strong growth over the last few years, goeasy has acquired just around 2% of the $218 billion Canadian subprime market. So, its scope for expansion looks healthy. Moreover, the company’s expanded product range and strong distribution channels could allow it to increase its market share in the coming years. Further, the company recently strengthened its balance sheet by raising $200 million by issuing senior unsecured notes. The Bank of Canada cut interest rates twice this year and could cut one more time this year. Lower interest rates could boost economic activities, thus driving credit demand and expanding the addressable market for the company.
Moreover, goeasy has raised its dividends at an annualized rate of 30% for the previous 10 years, while its forward yield stands at 2.42%. Its valuation also looks attractive, with its NTM price-to-earnings multiple of 10.8, making it an excellent buy.
Waste Connections
Waste Connections (TSX:WCN) is another stock that could deliver superior returns in the long run due to its solid underlying business and healthy growth prospects. It collects non-hazardous solid wastes in secondary and exclusive markets of the United States and Canada and disposes of them. It has been expanding its business organically as well as through strategic acquisitions. Since 2016, the company has acquired around $12 billion of assets. Despite its aggressive acquisition strategy, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin remains healthy at 32.6%.
Moreover, Waste Connections has planned for normalized merger and acquisition activities in the coming years while focusing more on organic growth and returning cash to its shareholders. It is constructing several renewable natural gas and resource recovery facilities, which will become operational in the coming years. These facilities could contribute an incremental EBITDA of $200 million by 2026. The company has also rewarded its shareholders by raising its dividends at an annualized rate of 14%.
