2 of the Strongest Growth Stocks in Canada

Alimentation Couche-Tard (TSX:ATD) and Constellation Software (TSX:CSU) are Canadian growth stocks that are worth loading up on today.

| More on:
Business success with growing, rising charts and businessman in background

Image source: Getty Images

Canadian growth stocks have been pummeled this year thanks to rising interest rates, recession fears, and a huge valuation reset suffered by the broader tech sector. Undoubtedly, investors hate growth right now, especially unprofitable growth. Though some of the harder-hit growth stocks have now gotten cut in half (some more than once), investors should be cautious before they dip a toe back into the growth waters with the assumption that rates on the 10-year note have peaked.

Canadians: Sticking with cheap growth stocks for 2023

Indeed, it’s hard to predict the bond market, just as it’s tough to forecast the stock market over the near term. The near term doesn’t matter as much for new investors willing to stick it out for decades at a time, though. These day-to-day volatile moves could continue.

Consider Alimentation Couche-Tard (TSX:ATD) and Constellation Software (TSX:CSU): two growth studs to compound your wealth over time. The following TSX beaters have been huge winners that can continue doing so in the years to come.

Alimentation Couche-Tard

Couche-Tard stock is a bit of a weird one. It’s a value stock, but it’s capable of some pretty impressive earnings growth. The company also boasts a rock-solid balance sheet, with genius managers who know how to maximize value for its long-time shareholders. The top bosses are big investors themselves and they act like they’re managing their own family funds.

You may know Couche as a convenience-store consolidator. The company has a history of smart deal-making. However, it’s been very quiet lately. Despite the growing cash hoard, Couche knows that its liquidity is a source of strength in a higher-rate environment. Cash is king.

As recession moves in, Couche-Tard could make the most of every dollar, as it goes bargain hunting. Indeed, it took lots of patience to hold off on excessive mergers and acquisitions (M&A) in 2021. Now, with prices getting better, Couche-Tard is ready to go, and its stock is likely to keep on surging on the back of earnings growth.

At 16.3 times trailing price to earnings (P/E), the stock is too cheap. And its growth profile still seems misunderstood by a majority of investors. With such a modest multiple on a proven grower, I think U.S. investors may wish to make the trip up north for a shot at one of the better risk/reward scenarios in this market.

Nobody knows when Couche will pull the trigger on a deal. One has to think it’s soon, though. Deals are getting better as this bear market drags.

Constellation Software

Constellation is another stellar growth company that’s thrived at M&A. The software company focuses on the smaller-cap Canadian software market, with plenty of cash to help bring out the best in high-growth companies on its radar. Like Couche, Constellation only makes deals when there’s value to be created over the long run.

With such a high-tech private-equity flavour and consistent earnings growth over an extended duration, it’s no mystery as to why the stock’s been (mostly) spared amid the 2022 stock market selloff, down just north of 7% year to date. At 70 times trailing P/E, the stock’s a bit rich. However, I think the multiple is worth paying if you seek strong growth for the next 15 years and beyond.

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 Joey Frenette has positions in Alimentation Couche-Tard. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.

More on Investing

Business man on stock market financial trade indicator background.
Tech Stocks

1 Growth Stock Down 50 Percent to Buy Right Now

There are plenty of growth stocks in the market worth considering, but Shopify (TSX:SHOP) looks like one of the best…

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

edit Sale sign, value, discount
Stocks for Beginners

These 3 Growth Stocks Are on Sale and Set to Surge

Some growth stocks are on sale right now that offer massive long-term potential for investors. Here's a trio to consider…

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Why Canopy Growth Stock Could Double in 2024

Canopy Growth (TSX:WEED) stock saw its share more than double in the last two weeks. So, can it do it…

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »