In order to achieve returns in excess of the market, you need to consider a stock’s growth potential. By this, I mean whether the company’s sales are likely to increase and whether industry conditions will help to facilitate growth.
While investors often look at quantitative factors such as where the share price is in relation to its 52-week low or its price-to-earnings multiple, just because a stock is undervalued doesn’t mean that it will recover anytime soon.
By looking at qualitative characteristics, you can get a better idea of where the company is headed and the quality of its growth opportunities. This will help you to focus on the stock’s long-term potential rather than trying to catch a dip in price, which usually isn’t a successful strategy.
Below are three stocks with strong growth prospects that could be great additions to your portfolio.
Cargojet Inc. (TSX:CJT) has seen its stock price rise 11% in the past month only, increasing by nearly 50% in the past year alone. Airline stocks have been doing well lately amid a low price of oil and a growing economy. Air Canada (TSX:AC)(TSX:AC.B) has seen tremendous growth over the past few years and is coming off all-time highs.
In the case of Cargojet, the company’s focus is more on commercial purposes with the focus being on overnight air cargo. Although retail stocks have been struggling this past year, as consumers continue to make purchases from the Internet, there will be many growth opportunities for Cargojet, as shipments from online retailers will only increase.
Savaria Corporation (TSX:SIS) is another high-growth stock with great potential in the years to come. As the population ages and baby boomers continue to retire, there will be a growing demand for Savaria’s personal mobility products.
The products will be essential for people with mobility issues, and given its necessity, the stock could even be considered recession-proof.
In the last month, the share price has risen 8%, and over the past year, the stock has increased 47%. This stock may take some time to grow, and it’ll likely rise in popularity as we see the demographics shift to an older demographic.
However, when that happens, we could see the company’s top line take off. Savaria is a great long-term buy to add to your portfolio that can add a lot of stability.
Canfor Corporation (TSX:CFP) is a stock that you may have expected to plunge given the NAFTA uncertainty and tariffs imposed on the company last year. However, Canfor has been a star on the TSX with returns north of 70% in the last 12 months. Year-to-date the share price is already up 24%.
Housing drives much of the demand for lumber and natural disasters in the U.S. along with a strong economy that will help ensure demand for Canfor’s products. Despite concerns surrounding NAFTA and tariffs, the continued growth of the stock is a good sign.
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Fool contributor David Jagielski has no position in any of the stocks mentioned.