Investing in quality stocks and then holding them for more than a decade can help you benefit from the power of compounding. It’s crucial to identify companies that have the potential to grow their earnings over time, which inevitably translates to outsized returns.
Here are two such TSX stocks you can buy now and hold for the next 10 years.
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Nuvei stock
Valued at a market cap of $4.6 billion, Nuvei (TSX: NVEI) is a Canada-based fintech company growing at an enviable pace. Down 80% below all-time highs, investors have the opportunity to buy a quality stock at a discount and benefit from market-beating gains over time.
Unlike several other growth stocks, Nuvei reports consistent profits and is forecast to end 2024 with adjusted earnings of $2.9 per share. So, priced at 11.3 times forward earnings, Nuvei stock is very cheap, given its profits are forecast to grow by 20% annually in the next five years.
Nuvei offers payment technology solutions to merchants in the Americas, Africa, Asia, and Europe. It just announced a partnership with Adobe, providing customers access to their payment technology through an existing integration with Adobe Commerce. The partnership enables businesses operating on the Adobe Commerce platform to simplify payment relationships and expand into new markets.
A widening base of customers allowed Nuvei to increase total payment volume by 72% year over year to US$48.2 billion in the third quarter (Q3) of 2023, while sales grew 55% to US$305 million. The company ended Q3 with adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of US$110.7 million, up 36% year over year, indicating a healthy margin of 36.3%.
However, an inflationary environment meant Nuveiās net income declined by 9% to US$56.8 million, or US$0.43 per share, in the September quarter.
Analysts remain bullish on NVEI stock and expect shares to gain another 20% in the next 12 months.
Waste Connections stock
Valued at $53 billion by market cap, Waste Connections (TSX: WCN) is among the largest companies in Canada. Part of a recession-resistant sector, Waste Connections provides non-hazardous waste collection, transfer, disposal, and resource recovery services in North America.
Last month, Waste Connections entered an agreement with Secure Energy Services to acquire a portfolio of 30 energy waste treatment and disposal facilities in Western Canada for $1.08 billion.
These oil and gas exploration and production (E&P) waste treatment and disposal facilities are located in key Canadian oil and gas basins and are on track to generate annual revenue of $300 million. The acquisition should close in Q1 of 2024 and add 50 basis points to Waste Connection’s EBITDA margin while being accretive to earnings and cash flow margins as well.
Despite a challenging macro backdrop, Waste Connections reported revenue of $2.06 billion in Q3, compared to $1.88 billion in the year-ago period. Its adjusted EBITDA margin in the quarter stood at 32.5%, up from 31.3% in the prior-year period.
Analysts tracking WCN stock expect adjusted earnings to grow to $6.44 per share in 2024, up from $5.11 per share in 2022. Priced at 31.8 times forward earnings, WCN stock might seem expensive, but Bay Street forecasts adjusted earnings to grow by 14% annually in the next five years.
