After a difficult year for equity investors in 2022, the last 12 months have been much better, despite a challenging macroeconomy. While investors remain worried about lower consumer spending, geopolitical tensions, inflation, and the possibility of a global recession in the near term, multiple interest rate cuts in 2024 should allow corporates to fuel their expansion plans at a lower cost and improve profit margins going forward.
Further, it’s crucial to understand that every bear market has eventually been replaced by a multi-year bull run, allowing investors to benefit from game-changing returns over time.
Considering these factors, here are two perfect growth stocks to buy now and hold forever.
Element Fleet Management stock
Valued at $8 billion by market cap, Element Fleet Management (TSX: EFN) stock has more than doubled investor returns in the last 10 years. It is the largest publicly traded pure-play automotive fleet manager globally, providing a wide range of fleet services and solutions to corporates across North America, Australia, and New Zealand.
Element Fleet Management’s portfolio of services aims to address every single aspect of a client’s fleet requirements, including vehicle acquisition, maintenance, integration of electric vehicles, accidents, and remarketing.
In the third quarter (Q3) of 2023, EFN grew net revenue by 14.8%, while adjusted operating income grew 11.7% year over year. It ended Q3 with free cash flow per share of $0.42, up from $0.38 per share in the year-ago period.
A widening base of cash flows allowed the company to raise annual dividends by 20% to $0.48 per share, indicating a forward yield of 2.4%. Despite the dividend hike, EFN has a sustainable payout ratio of 29%, providing it with enough room to strengthen its balance sheet, reinvest in growth projects, and enhance shareholder wealth via buybacks.
In the last eight years, the TSX stock has raised dividends by more than 20% annually, increasing the effective yield significantly. Priced at 15 times forward earnings, EFN stock is quite cheap and trades at a discount of 21% to consensus price target estimates.
WSP Global stock
Another TSX growth stock is WSP Global (TSX: WSP), which has already returned 650% to shareholders since December 2013, easily outpacing the broader indices in this period. Valued at $22.5 billion by market cap, WSP is among the largest companies in Canada that operate as professional consulting firms.
It plans, designs, and manages projects for rail, transit, aviation, highways, tunnels, bridges, maritime, and urban infrastructure verticals, servicing a broad base of public and private sector clients.
WSP’s acquisition of the environment & infrastructure business from John Wood Group allowed it to increase sales by 24.2% to $3.6 billion in Q3 of 2023. It ended the quarter with an order backlog of $14.3 billion, providing investors with top-line visibility.
WSP stock trades at 23.4 times forward earnings, WSP Global is not too expensive and trades at a discount of 16% to consensus price target estimates. It also pays shareholders an annual dividend of $1.5 per share, translating to a dividend yield of 0.83%.
