Stocks are excellent investments for long-term financial goals. Thus, when investing for tomorrow, investors should look for fundamentally strong companies with a growing earnings base or the ability to deliver sustainable earnings. These types of companies not only hold up well during market fluctuations but are also well-positioned to deliver above-average returns, helping investors build lasting wealth. With this backdrop, here are three TSX stocks Canadian investors should consider for the long run.
goeasy stock
goeasy (TSX:GSY) is a Canadian mid-cap stock knonwn for creating significant wealth for its investors. For instance, goeasy stock has grown at a compound annual growth rate (CAGR) of over 25% in the past decade, generating capital gains of 834%. Moreover, this subprime lender has consistently raised its dividend over the past decade, enhancing its shareholders’ value.
While goeasy stock has delivered above-average returns, the financial services company is in the early stages of its product, geographic, and channel expansion. This means that goeasy has a significant runway for growth in the coming years.
The company’s leadership in Canada’s subprime lending market positions it well to capitalize on the high demand and expand its consumer loan portfolio. Further, its omnichannel expansion and new product launches will drive higher loan originations, in turn, revenue. Higher sales, a mix shift towards secured loan products, steady credit performance, and operating efficiency will drive its earnings at a double-digit rate, supporting higher dividend payments and its share price.
While goeasy is poised to deliver solid growth, its stock trades at the next 12-month price-to-earnings (P/E) multiple of 9.5. Its valuation appears attractive, considering its double-digit earnings growth potential and a dividend yield of 2.7%.
Celestica stock
Celestica (TSX:CLS) is a leading provider of electronic manufacturing services and supply chain solutions. The company benefits from the accelerated investments in artificial intelligence (AI) infrastructure, including data centre hardware such as servers, networking, and storage.
The company’s hardware platform solutions division has seen rapid growth, led by solid demand in its ethernet switch business. Further, as spending on data centre hardware grows, the segment is likely to deliver stellar growth, supporting Celestica’s financials and share price. In particular, revenue from the communications market is expected to soar, fueled by strong demand for networking switches, including the 400G and 800G switches.
Besides networking, Celestica’s server business is thriving, driven by rising demand for AI and machine learning (ML) capabilities that require high-performance computing platforms. Additionally, the company’s expertise in high-performance storage for data centres positions it well to capture further growth.
Celestica’s focus on opportunities with strong secular tailwinds offers attractive growth potential and positions it well to deliver above-average returns in the long run. Moreover, its diversified portfolio positions it well for navigating cyclical market downturns.
Shopify stock
Shopify (TSX:SHOP) is another attractive stock for creating lasting wealth. The Canadian technology company is set to gain from the growing shift toward multi-channel selling and payment platforms. Its comprehensive, unified operating system and innovative products, such as Shopify Payments and Shopify Capital, position it well to grow its merchant base and drive gross merchandise volumes (GMV) to achieve higher revenues.
The company’s point-of-sale solution continues to gain traction, unifying online and offline commerce. Additionally, Shopify’s expansion into business-to-business (B2B) commerce is proving successful. In the second quarter (Q2) of 2024, the company recorded its highest-ever B2B GMV month, marking a 140% increase year over year, largely due to growth from its Shopify Plus merchants.
Shopify will benefit from significant growth potential for payment through international expansion and increasing activity in offline and B2B channels. This will drive higher GMV and gross payments volume. Further, it will boost merchant adoption and strengthen its ecosystem.
Secular tailwinds from the ongoing omnichannel shift, higher revenue, efficient marketing, and the use of AI and automation to drive productivity will likely help Shopify deliver sustainable earnings in the long term and support its share price.
