Although the economy has been weakening over the last year and a half, impacting the prices of many stocks, plenty of companies continue to grow their operations and improve their long-term potential. Therefore, the fact that many of these stocks are trading cheaply today makes growth stocks some of the top investments to buy right now.
Buying any stock while it’s undervalued is ideal. But when you buy a high-quality growth stock undervalued, not only can you earn a significant return when it eventually rallies back to fair value, you can also see years of continuous gains as the company continues to expand its operations.
A perfect example of this is Dollarama (TSX:DOL), one of the best long-term growth stocks on the TSX.
Just over a decade ago, on June 14, 2013, Dollarama closed trading at $10.84, after a temporary dip in its price. Less than a month later, the stock had recovered and, on July 10, 2013, closed trading at $12.26.
The value retailer
So if you happened to buy the stock while it was temporarily undervalued back on June 14, 2013, you would have made roughly 13% as it rallied to $12.26. That’s not too shabby of a return in less than a month, especially considering all the growth that came after.
For example, if you had bought on July 10, 2013, at $12.26 and held Dollarama stock until today, you would have earned a total return of 593%. However, if you had bought back on June 14, 2013, at $10.84 and held until today, you would have earned a total return of more than 684%.
So although the difference of buying undervalued may not seem like much in the short term with just a 13% gain, when you buy a high-quality stock with years of potential and it continues growing, those gains compound and end up becoming a lot more. In this case, buying Dollarama stock 11.5% lower led to a total return that was more than 90% higher.
This is why long-term growth stocks like Dollarama are some of the top stocks to buy now and hold long term, especially if they are trading undervalued due to the current market conditions.
Dollarama, in particular, is one of the best because it’s a company that has defensive qualities, an excellent management team and a well-known brand, as well as a track record of consistent above-average growth. Plus, it has pulled back from its highs recently, now trading almost $5 below its 52-week high of $90.
This growth stock is one of the top investments to buy now
In addition to Dollarama, another top Canadian growth stock to buy now and hold for the long haul is goeasy (TSX:GSY).
Despite investors’ worries about how goeasy would perform in a weakening economic environment, the stock has continued to fire on all cylinders. Just over three months ago, at the start of May, goeasy was trading below $90 a share.
But with its consistent performance and recent second-quarter earnings report that beat expectations, goeasy has continued to show why it’s one of the top growth stocks to buy for the long haul and has rallied by more than 50% to over $130 today.
Despite that rally, though, goeasy stock is still undervalued, which is why it’s worth considering adding to your portfolio today.
In its most recent earnings report for the second quarter of 2023, and despite a weakening environment, goeasy managed to report adjusted earnings per share (EPS) of $3.28, up 16% year over year and beat the consensus estimate of $3.17.
Furthermore, its loan growth has been strong, exceeding management’s guidance range and leading to even more revenue growth than expected. Most importantly, though, charge-offs came in below expectations from analysts and right in goeasy’s target range.
So with goeasy trading at a forward price-to-earnings ratio of just 8.9 times, below its five-year average of 10.5 times, and with its EPS expected to increase by over 17% this year and another 21% in 2024, the stock is certainly undervalued.
Therefore, if you’re looking for a top growth stock to buy and hold long term, goeasy is easily one of the best investments to consider today.
