3 Top Canadian Stocks That I Would Watch as Potential Buys

Given their solid performance and healthy growth prospects, these three Canadian stocks could outperform over the next three years.

| More on:
stock analysis

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The encouraging comments from Anthony Fauci, the U.S. Chief Medical Advisor, on Omicron appear to have increased investors’ confidence driving the equity markets higher. So, as the equity markets look to rebound, I expect the following three Canadian stocks to outperform over the next three years.

goeasy

goeasy (TSX:GSY) has delivered solid performance over the last 20 years, with its top line and adjusted EPS growing in double digits. It has returned over 1,350% at a CAGR of 43.5% during this period. Despite substantial growth, it has acquired just around 3% of the sub-prime lending market for loans under $50,000. With the sub-prime lending business being highly fragmented, the company has significant scope for expansion.

Amid the growth in economic activities, loan originations could rise in the coming quarters, benefiting goeasy. Meanwhile, the company is also venturing into new markets, strengthening its digital channels, and making strategic acquisitions, which could boost its financials. The management projects its loan portfolio to reach $3 billion by the end of 2023 compared to $1.8 billion at the end of the third quarter. So, given its healthy growth prospects and solid dividend growth at a CAGR of 34% over the last seven years, I believe goeasy to deliver oversized returns in the next three years.

Canadian Natural Resources 

Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) is one of the top performers this year, with its stock price rising above 78% for this year. Higher oil prices and solid quarterly prices appear to have increased investors’ confidence, driving the company’s stock price higher. Despite the surge, the company’s attractive valuation suggests more upside for these levels. Its forward price-to-earnings multiple stands at a juicy 7.6.

Oil prices have appreciated by over 15% from last week’s lows amid the improvement in investors’ sentiments. The company has entered an agreement to acquire Storm Resources, which could increase its natural gas and NGL’s production by 136 million cubic feet per day and 5,600 barrels per day, respectively. The management hopes to complete the deal by the end of this year. So, higher oil prices, increased production, and cost-cutting initiatives could boost Canadian Natural Resources’s financials in the coming quarters.

Additionally, the company had raised its quarterly dividends by 25% to $0.5875 per share, with its forward yield standing at 4.31%. So, I am bullish on Canadian Natural Resources.

Waste Connections

My final pick is Waste Connections (TSX:WCN)(NYSE:WCN). Given the essential nature of its business and its solid quarterly performances, the company has returned 29.8% this year. Meanwhile, I expect the uptrend in the company’s stock price to continue, as economic expansion could drive the demand for its services. Higher oil prices could increase exploration and production activities, thus driving the company’s revenue from the segment.

Additionally, Waste Connections operates in exclusive or secondary markets, which has helped it to maintain its margins. Also, the company makes strategic acquisitions to enter new markets or strengthen its competitive positioning. In the first nine months of this year, the company has acquired assets worth US$240 million, which could increase its annualized revenue by US$100-US$150 million. With its cash and cash equivalents standing at US$340 million, the company is well positioned to continue with its acquisitions.

Meanwhile, Waste Connections had also raised its quarterly dividend by 12.2% to US$0.205 per share in October. So, given its healthy growth prospects and stable cash flows, I expect Waste Connections to outperform over the next three years.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends CDN NATURAL RES. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.

More on Investing

potted green plant grows up in arrow shape
Stocks for Beginners

1 Canadian Growth Stock That Could Double Your Money in an Economic Recovery

The market downturn is an opportunity to lock growth during the economic recovery. This stock is a blend of value,…

Read more »

Bank sign on traditional europe building facade
Investing

RRSP Investors: Here’s the Best Canadian Bank Stock for Your Buck

Bank of Montreal (TSX:BMO)(NYSE:BMO) stock is getting far too cheap to ignore after the latest spill in the big Canadian…

Read more »

analyze data
Dividend Stocks

2 Safe Dividend Stocks That Could Help You Fight Inflation

A dependable stream of passive income is one way to help offset rising inflation rates. Here are two top dividend…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

Stay Invested in a Recession: Increase Positions in 2 Value Stocks

The suggestion of market analysts is to increase positions in two value stocks if you want to stay invested amid…

Read more »

Diagonal chain made of zeros and ones. Cryptocurrency and mining.
Cryptocurrency

Is This the End for Crypto?

Bitcoin (CRYPTO:ETH) is in the midst of its worst crash in years. Is this the end?

Read more »

Business success with growing, rising charts and businessman in background
Investing

4 Growth Stocks That Could Make You RICH by 2030

Canadians should take advantage of discounted growth stocks like goeasy Ltd. (TSX:GSY) and others in this summer bear market.

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Dividend Stocks to Buy as Inflation Surges in Canada

If you're worried about how surging inflation may impact your portfolio, here are three of the best dividend stocks to…

Read more »

You Should Know This
Dividend Stocks

High Inflation: The Good and the Bad for Canadians

Consider tucking away some of your long-term savings in quality dividend stocks like Brookfield Infrastructure in this correction.

Read more »