With the economy continuing to show signs of strength, many are wondering if we could see a soft landing and avoid a recession altogether. Therefore, investors need to be prepared for a potential bull market sooner than many had expected, which is why now is the time to add some of the top growth stocks in Canada to your portfolio.
Many stocks have been trading cheaply and off their highs for over a year now, but this environment wonât last forever. So itâs essential to take advantage while stocks still offer attractive value.
Plus, there are plenty of top growth stocks in Canada that are relatively defensive. Growth stocks are especially ideal in this environment should the economy end up going into a recession before seeing a full recovery.
So, if youâre looking for top growth stocks in Canada to buy in August 2023, here are two of the best that have both long-term growth potential as well as defensive business operations.
A top Canadian REIT to buy for growth
If youâre looking for a growth stock to buy and hold for years that you can have confidence owning through a potential recession, high-quality residential real estate stocks such as InterRent REIT (TSX: IIP.UN) are excellent choices.
Residential real estate is extremely defensive, and even if valuations for their properties are impacted or rental rates potentially fall, these REITs are still constantly generating tonnes of cash flow.
InterRent, in particular, is one of the top stocks in Canada to buy now due to its attractive mix of defence and growth. The REIT is constantly looking at how it can expand its portfolio or improve the value of its existing assets in order to increase the rental revenue it generates.
In the last five years, for example, its revenue has nearly doubled from $109 million in 2017 to $216.4 million in 2022.
More recently, InterRent has shown its operations could be improving. After seeing significant increases in costs last year as inflation was surging, those increased expenses have begun moderating, which led to a whopping 15% increase in same-property net operating income last quarter, the highest quarterly growth it’s seen since 2018.
Furthermore, the company also continues to recycle capital by selling off higher-value assets and reinvesting the proceeds into new opportunities.
Therefore, with InterRent still trading cheaply, at a forward price-to-adjusted funds from operations of just 25.4 times and below its five-year average of 31.6 times, it’s certainly one of the top growth stocks to buy in Canada right now.
One of the top defensive growth stocks in Canada
Another top stock to buy now in Canada that offers attractive long-term growth potential but is also highly defensive is Neighbourly Pharmacy (TSX: NBLY).
Like residential real estate, the healthcare industry is another highly defensive industry. And with Neighbourly’s strategy of acquiring pharmacies across the country, particularly in rural and suburban communities, the company offers appealing long-term growth potential.
As you can see from the chart, though, in the near term, Neighbourly has faced some headwinds. One of the problems has been a lack of pharmacists, in part due to a tight labour market. However, after its recent earnings report, these issues appear to be moderating.
Therefore, while Neighbourly trades more than 30% off its 52-week high, it’s certainly one of the top growth stocks to buy in Canada.
Analysts estimate Neighbourly’s revenue will grow by more than 22% in fiscal 2024 and another 15.3% in 2025. Furthermore, its earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to increase by more than 23% in both fiscal 2024 and fiscal 2025.
Therefore, with Neighbourly trading at a forward enterprise value (EV)-to-EBITDA ratio of 10.4 times, below its average of 14.8 times since going public in 2021, it’s easily one of the top growth stocks you can buy in Canada today.
