The easing of inflation and the anticipated stabilization and subsequent decrease in interest rates have brought growth stocks under the spotlight. Growth stocks tend to excel when interest rates are on a downward trajectory and corporate earnings are on the rise.
Although the current economic landscape doesn’t favour all Canadian corporations, several fundamentally strong Canadian growth stocks are trading at discounted valuations, presenting compelling investment opportunities at their current levels. Furthermore, these companies are poised to deliver solid growth as interest rates return to normal levels and earnings growth gains momentum.
With this background, let’s look at three Canadian stocks that I’d snap up with $3,000 right now.
Aritzia
Aritzia (TSX:ATZ) stock has underperformed the broader markets this year. This underperformance reflects a deceleration in its growth rate amid pressure on consumer spending due to the persistently high interest rates. Additionally, pressure on its margins and lack of newness within its product offerings are to blame for the drop in the shares of this fashion brand.
Nonetheless, Aritzia’s challenges are temporary, implying that its growth will accelerate, as the operating environment improves. Moreover, the company is enhancing its product pipeline, introducing newness to its offerings, and stabilizing the supply chain. These measures will support its growth and drive its share price higher.
Impressively, Aritzia has maintained its medium-term outlook and expects its net revenue to increase by 15-17% annually through 2027. The guidance reflects the opening of new boutiques, expansion in the U.S., increasing brand awareness, and strengthening of its e-commerce sales. Furthermore, higher sales and cost efficiencies will enable the company to grow its earnings faster than revenue. Overall, Aritzia is a solid growth stock, providing an excellent entry point near the current levels.
Cargojet
Like Aritzia, Cargojet (TSX:CJT) is another top growth stock poised to bounce back swiftly as the economic environment improves. The company is Canada’s leading air cargo provider. What stands out is that Cargojet stock has delivered multifold returns over the past decade for its shareholders.
However, the normalization in demand and weak macro backdrop hurting consumer spending has led to a pullback in Cargojet stock.
Nevertheless, investors should grab this opportunity to buy Cargojet stock at a discounted valuation. The company is well positioned to capitalize on the recovery in e-commerce demand and deliver stellar growth. Further, its long-term customer contracts, next-day delivery capabilities, and strategic partnerships with the leading logistics brands could continue to add stability to its financials.
goeasy
With its ability to consistently grow its revenue and earnings at a double-digit rate, goeasy (TSX:GSY) is a must-have growth stock for your portfolio. goeasy stock witnessed a pullback from its highs as investors feared that a high-interest rate environment would take a toll on its loan originations and increase the delinquency rate.
However, that didn’t happen as this subprime lender continues to deliver robust sales and earnings, reflecting higher loan originations and steady credit and payment performance.
Looking ahead, the expansion of its loan portfolio led by high demand, steady credit quality, and focus on driving efficiency will drive its sales and earnings. Further, the company’s solid earnings base suggests it could continue enhancing its shareholders’ returns through higher dividend payments in the coming years.
