3 TSX Stocks That Are Great Long-Term Bets

The following TSX stocks offer handsome growth prospects for long-term investors.

| More on:
data analyze research

Image source: Getty Images

The following TSX stocks offer handsome growth prospects for long-term investors.

Royal Bank of Canada

Canadian bank stocks have been trading weak since the beginning of the year. The biggest of them all, Royal Bank of Canada (TSX:RY)(NYSE:RY) has been no exception and has fallen almost 20% since its 52-week high. Notably, not-so-great fiscal third-quarter earnings released yesterday could weigh on the stock in the short term. So, RY stock might see more weakness, which could be an opportunity for long-term investors.

Driven by an uncertain macro environment and weak performance from its capital markets division, RY reported a 17% earnings drop year over year in the latest quarter. Concerningly, the bottom line came down mainly due to $340 million in provisions for bad loans. Banks provisioning aggressively again could be a harbinger of imminent uncertainties and volatile markets.

However, Royal Bank of Canada is a fundamentally attractive investment for long-term investors. Its unmatched scale, strong credit profile, and earnings stability play well for shareholder returns. It pays handsome dividends and yields 4% at the moment. The recent weakness is more due to macroeconomic conditions. RY will likely change the course soon and create meaningful value for its shareholders.

Tourmaline Oil

TSX energy stocks might not lose their sheen just yet. And notably, those with significant exposure to natural gas will shine even brighter. Canada’s leading natural gas producer Tourmaline Oil (TSX:TOU) is one of my favourite stocks on the TSX. It has been a massive wealth creator recently, standing tall among peers. Driven by solid earnings growth and dividend flood, TOU stock has returned a massive 170% in the last 12 months.

Tourmaline derives more than 80% of its earnings from natural gas. Note that the commodity has risen multi-fold in the last few years. As a result, Tourmaline’s free cash flows surged from a meagre $41 million in 2020 to $2.2 billion in the previous 12 months.

These incremental cash flows have rightly gone to repay debt and have effectively strengthened its balance sheet. At the end of 2020, Tourmaline had net debt of $1.7 billion, which has come down to $470 million as of June 30, 2022.

A solid balance sheet, superior earnings and dividend-growth prospects will likely keep boosting TOU stock higher.

Constellation Software

Almost all tech stocks trended massively lower as interest rates increased this year. However, one of the biggest in the sector, Constellation Software (TSX:CSU) has been relatively resilient. TSX tech stocks, on average, have lost 36% year to date, while CSU stock has dropped only 10%.

Its unique business model and consistent profitability have been behind its relative resilience this year. Constellation acquires smaller software companies with leadership positions in their respective domains. As tech stocks’ valuations corrected this year, CSU became all the more aggressive and expanded its portfolio.

Its earnings have grown by 20% CAGR in the last five years, notably beating its peers. Its superior financial growth drove the stock and returned 215% in this period. Given the unique business model and industry-leading financial profile, CSU stock justifies the premium valuation. It will likely ride higher on its robust earnings-growth prospects after its recent correction.

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 Constellation Software. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

More on Investing

Target. Stand out from the crowd
Dividend Stocks

RRSP Pension: 2 Dividend Stocks to Buy on the Latest Dip

These high-yield TSX stocks look cheap right now for RRSP investors.

Read more »

bulb idea thinking
Investing

The Smartest TSX ETF to Buy With $1,000 Right Now

Forget the TSX 60 or the TSX Composite. I prefer the TSX Dividend Aristocrats.

Read more »

Canada Day fireworks over two Adirondack chairs on the wooden dock in Ontario, Canada
Retirement

CPP Benefits Not Enough? This Top Dividend Stock Can Help Fund Your Retirement

Canadian retirees can look to supplement their CPP payout with quality dividend stocks such as Headwater Exploration.

Read more »

grow dividends
Stocks for Beginners

Why Cargojet Stock Is Surging Past 52-Week Highs

Cargojet (TSX:CJT) stock surged by 17% after a new deal was announced, with upgrades coming in as well for the…

Read more »

protect, safe, trust
Investing

It’s Time to Defend Your Wealth: 3 Top Stocks to Help Keep What’s Yours

For those looking to defend your wealth against what appear to be robust oncoming macro headwinds should consider these stocks.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

Safe and Sound Stocks for Canadians: My Top 5 Choices

Five safe stocks to buy on a market pullback.

Read more »

Financial technology concept.
Investing

Couche-Tard Stock: Today Is a Huge Buying Opportunity

Alimentation Couche-Tard (TSX:ATD) stock looks like a steal after its latest unwarranted plunge into a correction again.

Read more »

A stock price graph showing growth over time
Metals and Mining Stocks

Why Cameco Stock Soared 23% This Year

Cameco stock continues to ride high on strong supply/demand fundamentals and growing momentum in the nuclear industry.

Read more »