If you are new to investing, Canada has quite a few high-quality growth stocks. Canadian growth stocks can be found in an array of industries and sectors.
Likewise, you don’t always need massive growth to earn strong returns on your investment. In fact, sometimes stable growth, expanding margins/profits, a strong product/service mix, and a cheap valuation (or a growing valuation multiple) can enhance long-term returns.
If you are wondering what Canadian stocks could help grow your capital over the long term, here are three to consider today.
A fast-paced finance stock
Propel Holdings (TSX: PRL) has been one of Canada’s fastest-growing stocks. Last year, it grew revenues and normalized earnings per share by a respective 75% and 22%. It is expected to grow those metrics by a respective 72% and 43% in 2023.
Propel is a non-prime lender. It operates mainly in the United States. However, it has just started a lending platform in Canada. The company has proprietary technology that enables it to underwrite small loans to consumers quickly, effectively, and profitably. It offers its services through banks and third-party financial providers. It also has its own lending platforms and brands.
Despite its strong growth and a strong stock recovery over the past year (up 137%), this stock only has a market cap of $580 million. Likewise, it only trades for nine times its project 2024 earnings. It has a significant room for growth ahead.
A boring but growing retail chain
Propel is a bit on the risky side. So, if you want more of a steady growth stalwart, you may want to look at Alimentation Couche-Tard (TSX: ATD). While it has only grown revenues by a 7% compounded annual growth rate (CAGR) in the past five years, EBITDA (earnings before interest, tax, depreciation, and amortization) has risen by a 14% CAGR.
The company has been buying back stock aggressively, so earnings per share has increased even faster with a 17.8% CAGR. This company has many initiatives to expand organically (new store locations, brand enhancement initiatives through technology, broader food and drink mix, and different fueling/charging options).
It also has been very acquisitive. It just completed a major acquisition in Germany and Belgium that could be a growth catalyst in 2024. Right now, it has plans to double its EBITDA over the next five years.
A small-cap industrial stock with big potential
Hammond Power Solutions (TSX: HPS.A) is another unlikely growth stock. The company manufactures and distributes specialized electricity transformers. While it is not exactly an exciting industry, it is growing. In fact, it has experienced substantial growth. Hammond’s stock is up 1,485% over the past five years.
Electric vehicle charging stations, data centres, factories, power infrastructure, energy storage, and healthcare all require transformers. Hammond has a portfolio of products that can meet both product and geographic demand. Over the past five years, it has grown EBITDA and earnings per share by 40% and 55% CAGRs, respectively.
The company continues to expand its manufacturing capacity. As volumes have increased, profit margins have almost doubled over the past five years. Despite its exceptional growth, this stock’s forward valuation of 15 times earnings remains very reasonable.
