Amid recessionary fears, 2023 hasn’t turned out to be as bad as many would have expected. This led to a slight recovery in Canadian growth stocks. Despite the recent rally, several Canadian stocks continue to trade at a discount, providing solid entry points near current levels.
However, investors should note that near-term macro headwinds could keep the stock market volatile. Thus, investors with a long-term view should capitalize on the lower share prices of Canadian corporations.
If you have the patience to hold stocks are the next five years, consider investing in the shares of goeasy (TSX:GSY), Shopify (TSX:SHOP), and Aritzia (TSX:ATZ). Let’s look at the reasons that support my bullish outlook.
goeasy is a must-have stock to buy near the current levels. Its ability to grow revenue and earnings at a solid double-digit rate, expansion of consumer loan portfolio, solid credit quality, and robust dividend payments support my bullish view.
Notably, goeasy’s top line has grown at a CAGR, or compound annual growth rate, of 20% in the last five years. Earnings growth was even better, reflecting a CAGR of 27% during the same period. Thanks to its growing earnings base, goeasy has consistently paid dividend for 19 years and increased it in the past nine consecutive years.
Higher loan originations, a broad product base, growth across all products and customer acquisition channels, and a large subprime lending market will likely support its growth. Further, leverage from higher sales, steady credit and payment volumes, and an improved mix of the loan portfolio bodes well for growth.
goeasy is trading at the next 12-month price-to-earnings multiple of 7.3, which is at a multi-year low. Moreover, it offers a decent yield of 3.67% based on its closing price of $104.72 on May 24.
From consumer finance, let’s move to the tech sector. Shares of the tech giant Shopify jumped over 70% year to date. Despite this recovery, Shopify stock is trading at a significant discount from the pre-pandemic, providing a solid entry point for long-term investors.
Notably, Shopify’s large-scale, structural shift in selling models toward omnichannel platforms, and innovative products like Payments, Markets, and Capital bodes well for long-term growth. Further, its growing merchant base and partnerships with leading social media platforms are positives.
While the company’s top line is likely to grow rapidly, Shopify is focusing on driving sustainable profit by streamlining its operations and lowering costs. It recently announced the sales of its logistics assets, which will ease the pressure on margins and cushion its bottom line. Overall, Shopify is a solid stock to buy and hold for the next five years and outperform the broader markets.
After a stellar bull run over the past several years, Aritzia stock witnessed a correction in 2023, providing an excellent buying opportunity to long-term investors. While the near-term pressure on margins and moderation in sales growth weighed on its stock price, the strong demand for its products and ability to grow earnings at a breakneck pace could drive its stock price higher over the next five years.
The fashion house continues to open new boutiques and is expanding in the U.S., which augurs well for growth. In addition, the strength in the e-commerce channel, expansion into new categories, and higher mix of full-price sales bode well for long-term growth.