The top Canadian stocks witnessed a significant pullback over the past year due to macro headwinds and fear of recession. While the uncertainty around the future trajectory of the economy continues to pose challenges, now is an opportune time for investors to capitalize on the low prices of fundamentally strong Canadian companies and hold them for a very long time to create a significant amount of wealth.
Thus, if you are sitting on idle cash and don’t require it for emergency purposes, consider investing $2,500 in shares of companies with good growth prospects, consistently generate solid earnings, and appear attractive on the valuation front. Here, I’ll focus on two such TSX stocks that you can confidently invest $2,500 and stay invested for a lifetime.
Aritzia (TSX:ATZ) is a solid stock for long-term investors. Shares of this fashion brand have consistently outperformed the TSX and made its investors rich. For instance, Aritzia stock has appreciated over 224% in five years, reflecting a CAGR (compound annual growth rate) of close to 26.5%. Its market-beating returns are supported by its stellar financials and resilient business model.
This multi-channel retailer’s five-year revenue CAGR stands at 19%. At the same time, its earnings grew at a CAGR of 24%. It’s worth highlighting that Aritzia’s revenues increased by over 48% in the nine months of fiscal 2023, showing the strength and resiliency of its brand. Moreover, its adjusted earnings marked 22.7% during the same period.
Looking ahead, the momentum in Aritzia’s business will likely sustain on the back of solid demand, an improved mix of full-priced sales, and boutique expansion. The company plans to open 10 new boutiques annually through 2027, which will significantly boost its revenue. Further, the strengthening of its e-commerce platform augurs well for growth.
Aritzia sees its top line growing by 15-17% annually through 2027. Meanwhile, its earnings are forecasted to grow faster than revenues. While its revenue and earnings are projected to grow rapidly, its stock is trading at a discount. Aritzia’s next 12-month price-to-earnings multiple of 20.2 is lower than its historical average of 27.2, providing investors with a solid buying opportunity near the current levels.
Dollarama (TSX:DOL) is an all-weather stock that can be relied upon for years. The company operates discount retail stores and offers products at low fixed price points. Thanks to its value proposition, Dollarama benefits from higher traffic, which is reflected through the double-digit growth in its revenue and earnings.
Dollarama’s top line has had a CAGR of 11% since 2011. At the same time, its earnings grew at a CAGR of 17%. Thanks to its growing earnings base, Dollarama has consistently increased its dividend and enhanced its shareholders’ value.
Looking ahead, Dollarama is poised to deliver strong revenues and earnings due to its compelling value on everyday products. Moreover, its extensive network of stores in the domestic market, growing international footprint, and convenience of shopping augur well for long-term growth. Further, the company will likely hike its dividend at a healthy pace due to its solid earnings-generating capabilities.