Stocks are known for their solid returns in the long term, thus helping investors to create generational wealth. However, investors should take caution and consider investing in companies with a stable revenue base, the ability to deliver strong growth, even at scale, a large and growing addressable market, and that are profitable or are likely to achieve profitability soon. Most importantly, investors should diversify their portfolios across multiple sectors.
So, if you can spare $500, here are five fundamentally strong Canadian companies that fit well on the parametres discussed above. These Canadian stocks have delivered solid returns in the past and have the potential to outperform the broader markets in the long term.
goeasy (TSX:GSY) is a perfect stock to create wealth. The company offers loans to subprime borrowers. Further, it has been consistently delivering double-digit sales and earnings growth. Thanks to its solid earnings, it has enhanced its shareholders’ returns by increasing its dividend for nine consecutive years.
Its comprehensive product range, omnichannel offerings, and high-quality loan originations will likely drive its revenue and credit quality. Further, a large subprime lending market, improved product mix, and underwriting enhancements will likely cushion its earnings and support higher dividend payouts.
From financial services, let’s move to the tech sector. Within the tech space, Shopify (TSX:SHOP) is a solid stock to buy now and hold for the next decade. The e-commerce company is growing revenue at a decent pace, even at a large scale, which is positive. Further, innovative products like Payments and Capital bode well for long-term growth and position it well to capitalize on the ongoing digital shift in selling models.
Further, Shopify’s focus on easing pressure on margins and driving sustainable profit by streamlining its operations bode well for growth. While its stock has recovered from its lows and jumped nearly 72% year to date, it is still trading at an attractive discount from its highs, providing a solid entry point for long-term investors.
Aritzia (TSX:ATZ) is a solid stock in the consumer space. The stock has witnessed a pullback due to the moderation in its growth and pressure on margins after a stellar run in the past several years. Nonetheless, this correction is an opportunity to invest in Aritzia stock, which is poised to deliver double-digit revenue and net income growth over the next several years.
The opening of new boutiques, growing brand awareness, and expansion in the high-growth U.S. market will support growth. Also, the momentum in the e-commerce segment and improved sales mix will likely drive its revenue and earnings.
Dollarama (TSX:DOL) stock offers growth, income, and stability. It sells products at lower fixed-price points, which drive consumers to its stores, and supports its financials and stock price. While it operates a low-risk defensive business, its high growth supports the uptrend in its stock in all market conditions.
Its value proposition, extensive network of domestic stores, and large customer base will likely drive its financials in the coming years. Further, its growing global footprint will likely support its growth. Besides capital gains, investors are likely to benefit from its growing dividend payments.
Air cargo company Cargojet (TSX:CJT) is another attractive bet for long-term investors. Its partnerships with large logistics companies, diversified revenue base, and next-day delivery capabilities to most Canadian households drive its top and bottom lines. Further, its long-term contracts with minimum revenue guarantees add stability.
Looking ahead, Cargojet’s high customer retention rate, focus on network and fleet optimization, benefit from growing e-commerce penetration, and international expansion opportunities will likely push its stock price higher. Further, high entry barriers to the sector provide augur well for long-term growth.