So far, the equity market has proven resilient in 2023, despite economic uncertainty. Further, a moderation in the inflation rate indicates that the central bank could increase interest rates less aggressively or announce a pause on hikes, which bodes well for equity investors.
As the operating environment for corporations improves, this could create an opportunity to invest in shares of companies likely to get a boost from easing macro challenges. So, if you are sitting on cash and plan to invest, here are two fundamentally strong Canadian stocks that are great buys near the current levels.
Aritzia
Shares of Canadian fashion brand Aritzia (TSX:ATZ) have underperformed the broader equity market so far this year. After witnessing unprecedented growth over the past several years, Aritzia’s growth rate slowed this year. Macroeconomic challenges and lack of newness across its product assortment are to blame.
To address near-term concerns, the company focuses on its product pipeline and plans to introduce additional newness across its offerings with a more stabilized supply chain. This could help to reaccelerate its sales growth. In addition, an improving macro environment will support its financials.
Barring short-term headwinds, square footage expansion, cost efficiencies, and leverage on fixed costs will reaccelerate its top- and bottom-line growth in the coming years. Looking ahead, Aritzia expects its net revenue to grow at a CAGR, or compound annual growth rate, of 15-17% through 2027. The opening of new boutiques, U.S. expansion, and strength in its e-commerce sales will support its overall financials. Moreover, higher net revenue and margin expansion will likely drive its earnings faster than sales.
Overall, investors should note that Aritzia’s problems are transitory, and the recent correction in its price presents an excellent opportunity for buying its shares.
goeasy
My next pick is goeasy (TSX:GSY). This subprime lender has a compelling history of delivering stellar growth regardless of market conditions. Investors should note that the top line of this financial services company has grown at a CAGR of 17.7% from 2012 to 2022. Meanwhile, its five-year revenue CAGR (as of June 30, 2023) stands at an impressive 19.44%.
Thanks to its solid sales and operating leverage, goeasy’s bottom line grew at a CAGR of 29.5% between 2012 and 2022. Moreover, its EPS (earnings per share) has a CAGR of 31.91% in the last five years.
The company is well positioned to capitalize on the large subprime lending market and benefit from high-quality loan origination. The increased loan originations and expanded product base will drive its top line. At the same time, steady credit performance and operating efficiency could continue to cushion its earnings.
Thanks to its high-quality earnings base, goeasy has consistently enhanced its shareholders’ value through higher dividend payments. Moreover, its growing earnings base will enable it to return cash to its shareholders via dividend growth.
goeasy stock offers high growth and income. Its stock has gained about 21.6% year to date. However, it still trades at a discounted value. goeasy stock is trading at a forward price-to-earnings multiple of 8.4, and considering its double-digit earnings growth and a dividend yield of nearly 3%, goeasy stock appears highly attractive near the current levels.
