Several TSX stocks have delivered outsized gains to shareholders in the past decade. For instance, shares of FirstService (TSX: FNV) have gained 611% after adjusting for dividends since its IPO (initial public offering) in May 2015.
Valued at $10 billion by market cap, FirstService provides property management services to residential and commercial customers in the U.S. and Canada.
Another Canadian company operating in a similar space is Colliers International (TSX: CIGI). In addition to property management, Colliers is also involved in investment management services.
Colliers stock is up 377% since May 2015 and surged 766% in the last 10 years. If we expand the investment horizon to 20 years, CIGI stock has returned a staggering 2,600% valuing the company at a market cap of $5.5 billion today.
As past returns don’t matter much to investors, let’s see which TSX stock is a better buy right now.
The bull case for Colliers stock
Despite a challenging macro environment, Colliers achieved significant growth in its high-value recurring service lines with a 12% increase in outsourcing and advisory, while the investment management business grew by 23%.
Around 70% of its earnings come from recurring revenue, providing investors with a stable stream of cash flows across business cycles. A recurring earnings base allows Colliers to pay shareholders an annual dividend of US$0.30 per share, indicating a forward yield of 0.26%. While the dividend yield is quite low, these payouts have tripled in the last eight years.
However, Colliers emphasized that it is experiencing industry-wide declines in transaction volumes due to higher interest rates, a tightening money supply, and an uncertain economy.
Colliers revised its outlook for 2023 to reflect declines in transaction velocity and the current market environment. It expects capital markets and leasing transaction volumes to fall between 5% and 15% in the fourth quarter (Q4).
Further, in its recurring service lines, Colliers expects to see continued growth organically and via acquisitions. Its investment management business has also been hampered by tepid fund-raising activity. Colliers expects fundraising at US$3 billion in 2023 compared to US$8 billion in 2022.
Priced at 18.6 times forward earnings, CIGI stock is not too expensive and trades at a discount of 18% to consensus price target estimates.
The bull case for FirstService stock
FirstService’s organic growth in Q3 was 10% as the company continues to gain market share, showcasing its focus on customer acquisition. The company attributed organic growth to new contract wins, which led to higher management fees and labour-related sales.
Its total sales were up 16% year over year, while earnings before interest, tax, depreciation, and amortization stood at US$112 million, rising 17% compared to the year-ago period. However, higher costs meant FirstService could expand earnings per share by just 7% in Q3 of 2023.
Part of a recession-resistant business, FirstService pays shareholders an annual dividend of $1.35 per share, indicating a yield of 0.6%. Its dividends have risen by more than 100% in the last eight years.
Priced at 32 times forward earnings, FSV stock trades at a premium compared to Colliers. Due to its lofty valuation, Bay Street expects FSV stock to surge by less than 5% in the next 12 months.
