Want to Beat the TSX? 4 Top Stocks to Outgrow Broader Markets

These cheap Canadian growth stocks have solid upside potential and are likely to outperform the TSX by a significant margin.

Paper airplanes flying on blue sky with form of growing graph

Image source: Getty Images

Macro headwinds and fear of a recession turned Canadian investors risk averse. This led to a massive decline in growth stocks, especially of those companies that lack profits. Though the economic environment remains challenging, investors can start accumulating top stocks at lower prices to benefit from the recovery in their prices as the macro headwinds ease. 

So, if you can spare some cash, here are the four top growth stocks that are trading cheap and have the potential to beat the TSX.

Aritzia

Despite the recent correction, Aritzia (TSX:ATZ) stock has returned over 150% in three years, reflecting a CAGR, or compound annual growth rate, of over 36%. The strong demand for its offerings continues to drive its strong organic sales and supports its profitability. 

While its domestic business remains strong, it continues to expand its base in the U.S., which will accelerate its future growth. Moreover, its expansion into new segments and opening of new boutiques augurs well for growth. Leverage from higher sales and solid expense management will cushion its bottom line. Meanwhile, its focus on reducing debt and strong cash flows will fund its growth initiatives. 

Shopify

With tech stocks losing most of their value this year, it’s prudent to pick a few high-quality names from this sector. I am bullish about Shopify’s (TSX:SHOP)(NYSE:SHOP) prospects. Though Shopify stock has erased most of its gains, it has the potential to compound investors’ wealth in the coming years. 

Its strong competitive positioning, investments in e-commerce infrastructure, strengthening of fulfillment, and increased adoption of payments and capital offerings provide a solid platform for growth. Meanwhile, international expansion, the addition of new features to its merchant solutions, and an increase in sales and marketing channels through partnerships with social media companies will drive its merchant base and support its growth. 

Docebo

Docebo (TSX:DCBO)(NASDAQ:DCBO) is my next stock pick from the tech sector. It has lost 53% of its value so far this year. Despite the correction, Docebo stock is still up about 148% in three years, representing a CAGR of over 35%. I see this pullback in Docebo as an opportunity to buy the shares of this high-growth company at a lower price. 

The momentum in Docebo’s business has sustained, reflected through its solid annual recurring revenues. Docebo’s annual recurring revenues have grown at a CAGR of 66% since 2016. Moreover, its average contract value has grown rapidly. Also, its ability to acquire new customers, high retention rate, increased revenue from existing customers, and the opportunistic acquisition will likely drive its financials and stock price. 

goeasy

goeasy (TSX:GSY) is the final stock on this list. It has outperformed the TSX by a significant margin and offers a solid dividend. For instance, goeasy stock has gained about 160% in three years. This growth comes despite the recent pullback in its stock price. Further, goeasy has grown its dividend at a CAGR of over 34% in the last eight years. 

With its strong sales and earnings growth and solid dividend payment history, goeasy is a perfect stock for investors looking for high-growth and consistent income. Its wide range of lending products, strong loan originations, and channel expansion will likely lead to double-digit growth in its top line. Solid sales, strong credit performance, and efficiency savings will cushion its margins and bottom line.

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.

Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends ARITZIA INC and Docebo Inc.

More on Investing

Payday ringed on a calendar
Dividend Stocks

How Much to Invest to Get $500 in Dividends Every Month

These three monthly paying dividend stocks could help you earn over $500 monthly in passive income.

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Canadian Bank Stocks: Buy, Sell, or Hold?

Canadian bank stocks are rock-solid investments, but one is a no-brainer buy following the recent interest rate cut.

Read more »

online shopping
Investing

Ring! Ring! Serious Yield Calling at These 3 Telecom Stocks

BCE (TSX:BCE) and other high-yield telecoms worth watching as their yields soar further.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

TFSA Maxed Out? Here Are 5 Other Ways to Grow Your Wealth in Canada

Canadians have other options to grow wealth after maxing out their TFSA contribution limits.

Read more »

A man smiles while playing a video game.
Dividend Stocks

RRSP: 2 High-Yield Dividend Stocks to Consider Now

These top TSX dividend stocks offer attractive yields today for RRSP investors.

Read more »

edit Sale sign, value, discount
Dividend Stocks

2 Bargain Stocks You Can Buy Today and Hold Forever

These two stocks are reliable and trade ultra-cheap, making them among the best TSX stocks to buy now and hold…

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

Top 3 Dividend Stocks Yielding Over 7% to Buy in June 2024

Are you looking for the best of the best dividend stocks? These three are the ones that belong on your…

Read more »

Online shopping
Tech Stocks

Up 42% from 52-Week Lows, Is Shopify Stock Still a Buy?

Shopify (TSX:SHOP) stock looks like one of Canada's best growth stocks. And right now, it looks like it's on sale,…

Read more »