The uncertain economic trajectory and fear of recession continue to restrict the recovery in growth stocks. However, with growth stocks trading cheap, now is the time to capitalize on their lower prices and go long. Thus, investors planning to invest $1,000 in May could consider investing in the shares of goeasy (TSX:GSY), Cargojet (TSX:CJT), and Aritzia (TSX:ATZ).
These Canadian corporations have a history of consistently delivering profitable growth. Moreover, Canadian stocks are trading at a discount, making them attractive near the current levels.
goeasy
With a double-digit earnings growth rate and a next 12-month (NTM) price-to-earnings multiple of 6.5, goeasy is a must-have growth stock offering deep value near the current levels. This lender to subprime borrowers has delivered stellar growth (revenue and earnings increased at a CAGR of 20% and 27% in the last five years).
Thanks to its robust financial performance, goeasy stock is up about 170% in five years (including the recent pullback). To enhance its shareholders’ returns further, goeasy has increased its dividend in the past nine consecutive years.
While goeasy stock is trading cheap, the momentum in its business continues. The company benefits from high-quality loan originations that drive its customer loan portfolio and adds stability to its credit quality. Furthermore, its wide product range, omnichannel distribution, and large subprime lending market bode well for growth. Leverage from higher sales, steady credit performance, and operating efficiency will likely drive its earnings, stock price, and future dividend payments.
Cargojet
The expectations of a near-term economic downturn and reduced consumer spending have weighed on Cargojet’s financials and, in turn, its stock price. Nonetheless, Cargojet’s issues are transitory and will likely subside soon. Moreover, the company is in the early stages of its cost-reduction initiatives, implying that Cargojet will see additional benefits of cost savings in the coming quarters, which will cushion its margins.
The near-term pressure on consumer spending could impact the company’s volumes. However, Cargojet’s strategic partnerships with the leading logistics companies, revenue diversification, and its next-day delivery capabilities to over 90% of the Canadian population position it well to rebound and deliver solid growth in the long term.
Also, its long-term contractual arrangements with customers led by minimum revenue guarantee and cost pass-through provisions are positives and add stability. Furthermore, its high customer retention rate, focus on network and fleet optimization, and international growth opportunities will likely support its growth.
Aritzia
Shares of the lifestyle apparel company Aritzia witnessed a pullback following its fourth-quarter financial results. The near-term pressure on margins and an expected moderation sales growth rate in fiscal 2024 led to a decline in its price.
However, the recent pullback in the Aritzia stock is a solid buying opportunity for long-term investors. While margin headwinds and tough year-over-year comparisons pose near-term challenges, its fundamentals remain intact.
The strong demand, new boutique openings, expansion in the U.S., and strength in the e-commerce channel could continue to drive its financials. Its revenues are forecasted to increase at a CAGR of 15-17% through 2027. Meanwhile, its earnings growth is expected to surpass the sales growth during the same period.
Overall, the sustained demand for Aritzia’s offering and a solid growth outlook will likely support Aritzia stock.
