The macro uncertainty, persistently high inflation, and the recent banking chaos weighed on investors’ sentiments and dragged high-growth Canadian stocks lower. However, this pullback is an excellent opportunity for investors to buy and hold shares of Canadian corporations growing briskly.
For instance, shares of high-growth companies like goeasy (TSX:GSY) and Aritzia (TSX:ATZ) are trading at a significant discount from their highs, providing an opportunity for long-term investors to invest.
It’s worth highlighting here that both Aritzia and goeasy have remained immune to macro headwinds and consistently delivered stellar sales and earnings, which shows the strength of their business model. Furthermore, both these stocks have significantly outperformed the TSX in the past five years.
While both these companies are growing fast and have multiplied their shareholders’ wealth, let’s check which could deliver higher returns in the coming years.
Aritzia to deliver double-digit growth
Despite the pressure on consumer discretionary spending, Aritzia has managed to grow its sales at a double-digit rate in 2022. Its revenues have grown at a CAGR (compound annual growth rate) of 19% since FY18. Meanwhile, its top line registered an increase of 48.3% in nine months of FY23.
Thanks to this strong growth, Aritzia stock has increased at a CAGR of over 29% in the last five years, delivering a return of about 260%.
The Canadian retailer expects its revenues to increase at a CAGR of 15-17% through FY27. The strong demand for its offerings, a favourable mix of full-priced sales, strengthening of the e-commerce platform, and expansion of boutiques, especially in the U.S. (high-growth market), bodes well for growth.
While Aritzia’s top line is projected to increase at a solid pace, management expects its bottom-line growth rate to exceed sales, which will drive its stock price higher. ATZ stock is trading at the next 12-month price-to-earnings multiple of 21.5, which is significantly lower than the historical average of over 30, providing a solid opportunity to invest.
The momentum in goeasy’s business to sustain
goeasy’s top and bottom lines have consistently increased at a double-digit rate, which led to an increase in its stock price. For instance, goeasy’s revenues increased at a CAGR of 20% in the past five years. Meanwhile, EPS (earnings per share) grew at a CAGR of 27%. At the same time, goeasy stock has grown at a CAGR of over 23%, delivering a return of about 187%.
goeasy is also reliable dividend stock and is included in the S&P/TSX Canadian Dividend Aristocrats Index. It has uninterruptedly increased its dividend for nine years. Moreover, it has paid a dividend for 19 years.
Higher loan originations, a wide product range, and a multi-channel offering will likely drive its top line at a double-digit rate. Meanwhile, its solid credit quality and operating leverage will cushion its earnings.
Thanks to the recent correction, goeasy stock is trading at the next 12-month price-to-earnings ratio of 6.8, which is much lower than its historical average of 13.2, providing a solid entry point near the current levels.
Bottom line
Both Aritzia and goeasy have solid business models and are growing rapidly. However, goeasy’s low valuation, double-digit earnings growth, and increasing dividend make it a more compelling investment.
