Canada is a great place to find growth stocks at attractive prices. The Canadian stock market is relatively small (at least compared to the U.S.), but still large enough that you can find companies with global exposure.
The best part is that periodically quality Canadian growth stocks rise up, but without the notoriety (and valuations) that they might get in the U.S. If you are looking for some growth stocks with strong potential at fair prices, here are three to consider buying right now.
A tech stock with a strong future
Descartes Systems (TSX: DSG) is not a cheap stock, but it still has significant room for growth ahead. This stock trades for $98.82 per share. Descartes provides software solutions for the transportation and logistics industries.
Descartes helps shippers save money by offering streamlined operations. It tends to earn high recurring revenues, elevated profit margins, and strong excess cash. Over the past five years, it has been growing revenues and earnings per share by a mid-to-high teens rate.
The shipping industry is facing a short-term recession. That could slow Descartes’ business. Fortunately, it has a big $200 million-plus net cash balance that it can deploy into acquisitions.
While organic growth might slow, smart acquisitions could further propel this stock longer term. If Descartes stock pulls back any further, it could be a good buying opportunity.
A quality compounder under $100
Alimentation Couche-Tard (TSX: ATD) may not seem like your typical growth stock, but its long-term returns have been exceptional. Its stock has earned 148% over the past five years (a 19% compounded annual growth rate (CAGR)).
The company operates convenience stores and gas stations across the world. While these are not flashy assets, Couche-Tard has great brand and operational expertise to help maximize profits.
For the past five years, the company has grown revenues by an 11% CAGR. Earnings per share (EPS) grew by a 15.8% CAGR. The company has been aggressively buying back stock over the past few years. That should continue to elevate EPS going forward.
Couche-Tard has been very acquisitive over the years. It recently acquired a large European portfolio that should propel a new growth platform in the region. The stock trades for $68.60 today. Its price-to-earnings (P/E) of 16 is not an unreasonable valuation for a longer-term investment.
An essential retailer with a long growth record
Another Canadian growth stock for under $100 per share is Dollarama (TSX: DOL). It trades for $86 per share. Like Couche-Tard, Dollarama is not exactly an exciting business. It provides conveniently priced essential goods across Canada and Latin America.
With inflation soaring, Dollarama has been a beacon for many consumers (even though it has significantly raised prices as well). Over the past few years, it has enjoyed strong growth in sales and earnings.
Revenues have been growing by the high single digits and EPS has grown by a 12% CAGR. Over the past five years, the stock has risen 72%. At 26 times earnings, this stock is quite expensive for an essential goods retailer.
It may be wise to wait for a larger pullback. However, if your investment timeframe is 5 or 10 years, Dollarama is a well-run company with a wide horizon to continue growing.
