Investing in top TSX stocks with fundamentally strong businesses can help generate above-average returns over time. While the S&P/TSX Composite Index has trended higher and many Canadian stocks have rallied, a few still have solid upside potential and will likely deliver outsized returns in the long term.
With this background, here are my top picks that are poised to deliver solid growth. Further, these stocks will help diversify your portfolio and reduce risk.
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Stock #1
Alimentation Couche-Tard (TSX:ATD) is one of the top TSX stocks to buy right now, as it will add stability, growth, and income to your portfolio. Moreover, its stock is undervalued and trading at a forward price-to-earnings (P/E) ratio of 18.2, which is lower than its peers Dollarama and Loblaw. While Couche-Tard stock appears attractive on the valuation front, the company is consistently growing its revenue and earnings, which indicates that the uptrend could sustain.
Couche-Tard is well-positioned to benefit from its defensive business model and strategic pricing. Moreover, its acquisitions will help expand its store base and accelerate its growth. Further, the convenience store operator’s focus on lowering operating costs will cushion earnings and cash flows. Moreover, its solid balance sheet positions it well to capitalize on growth opportunities.
Stock #2
goeasy (TSX:GSY) is another attractive stock poised to deliver notable gains. Shares of this financial services company have appreciated over 246% in five years and consistently outperformed the broader equity markets. Its ability to grow its financials at a solid pace and focus on enhancing its shareholders’ value with higher dividend payments act as a catalyst.
goeasy stock has significant growth opportunities. Its leadership in Canada’s subprime lending space, a large addressable market, and a growing consumer loan portfolio will drive its top line. Further, geographical expansion, diverse funding sources, and new product launches will accelerate its growth. In addition, its solid credit underwriting capabilities and improving operating efficiency will bolster its earnings and support higher dividend distributions and a higher share price.
Stock #3
Aritzia (TSX:ATZ) stock has witnessed impressive growth of over 128% over the last year, supported by its ability to grow revenue and net income despite the challenging operating environment. Further, this luxury clothing maker aims to increase its top line by 15–17% annually through fiscal 2027, which will likely drive its earnings and support its share price.
Aritzia’s growth will likely be driven by the expansion of its boutiques in high-demand areas. The clothing retailer’s focus on new designs and assortments, expansion of omnichannel offerings, and investments in supply chain and technology provide a solid base for future revenue and earnings growth.
Stock #4
Investors could also consider buying shares of the energy giant Canadian Natural Resources (TSX:CNQ) for steady capital gains and higher dividend income. Its stock has grown over 237% in five years. Moreover, the company has raised its dividend for 24 straight years at a compound annual growth rate (CAGR) of 21%, thereby enhancing its shareholders’ value.
The oil and gas company’s high-value reserves, long-life assets, and focus on lowering operating costs will likely drive its earnings and support its stock price in the upcoming years. Further, Canadian Natural Resources’ robust balance sheet and low maintenance capital requirements augur well for growth.
Stock #5
Lastly, investors could bet on Celestica (TSX:CLS) to generate above-average returns. The company provides supply chain solutions. Its stock has gained over 121% in one year and rallied over 591% in the past five years. However, Celestica stock has recently witnessed a pullback. This provides an excellent buying opportunity, as the stock has significant upside potential, owing to its exposure to high-growth sectors such as artificial intelligence (AI).
The ongoing investments in data centre infrastructure will likely boost demand for Celestica’s hardware platform solutions, supporting its revenue and earnings. Moreover, the continued momentum in its Aerospace and Defense segment will also support growth.
