Compound interest possesses the capability to amplify wealth. Consider the case of a low-volatility stock such as Loblaw, which has delivered a compound annual growth rate (CAGR) of nearly 18% over the last five years. This suggests that a $10,000 investment in Loblaw would have more than doubled in value within those five years.
While Loblaw has generated remarkable returns, the TSX has several fundamentally strong growth stocks that have consistently outperformed the broader equity markets and delivered substantial returns. These top Canadian stocks have the potential to generate significant wealth in the upcoming years.
In light of this, let’s examine two Canadian growth stocks with the potential to deliver an average annualized return exceeding 21% in the coming years. This indicates that these stocks could transform a $10,000 investment into more than $31,000 by 2030.
goeasy (TSX:GSY) is a top stock for creating wealth in the long term. This leading non-prime consumer lender has been growing rapidly and has made its investors rich. The company sees solid demand for its unsecured and secured loans and point-of-sale financing, which drives its financials and share price.
It’s worth highlighting that this Canadian financial services company’s revenue and earnings per share (EPS) have grown at a CAGR of 19.6% and 31.9%, respectively. Moreover, goeasy stock has grown over 360% in five years, reflecting a CAGR of about 36%.
While goeasy stock has easily outperformed the broader market, it could continue to do so in the future owing to its diversified revenue sources, large target market, sustained demand, and operational efficiency enhancements. Furthermore, the company’s solid balance sheet, diversified funding sources, and multichannel offerings are anticipated to support its growth.
goeasy is also a Dividend Aristocrat, implying it has consistently rewarded its shareholders with significant cash through increased dividend payments. Looking ahead, its growing consumer loan portfolio, steady credit and payment performance, and operating leverage will cushion its earnings and enable it to grow its dividend at a solid pace.
Furthermore, the stock’s valuation is quite compelling. With a forward price-to-earnings multiple of 10.2, it presents an attractive opportunity, especially considering its double-digit earnings growth potential and a decent dividend yield.
Shopify (TSX:SHOP) is a must-have growth stock to create wealth in the long term. Shares of this Canadian tech giant have gained over 410% in five years, reflecting a CAGR of nearly 38.5%. It’s worth highlighting that this includes the significant correction in SHOP stock following the COVID-led rally.
Shopify’s ability to consistently grow its merchandise volumes and top line acts as a catalyst. The company is poised to benefit from the structural shift in selling models towards digital platforms. In addition, its innovative products and investments in merchant solutions augur well for future growth.
Shopify’s dominant positioning in the e-commerce sector will enable it to capitalize on the digital shift. Meanwhile, its asset-light business, shift in go-to-market improvements, and increase in take-rate will likely support its financials and share price.