Many of Canada’s top-quality stocks have been on a breakout of fresh 52-week and all-time highs. Many economic worries from 2023 turned out to be not as bad as many expected. Consequently, stocks in good businesses continue to get fresh bids up from the market.
Certainly, valuations are starting to become elevated. However, if you have a long investment horizon, great quality businesses tend to earn their elevated valuation.
Here are three growth stocks with strong momentum and the potential for great long-term returns as well.
WSP Global: A high-quality Canadian stock
WSP Global (TSX:WSP) stock is up 11% in 2024, 18% over the year and 200% over the past five years. It has delivered a 24% compound annual growth rate (CAGR) over that time.
WSP has become a global leader in engineering, design, project management, and consulting services. As populations increase, demand for energy, real estate, and infrastructure are all pushing demand for its services.
WSP has a strong backlog worth 12 months of revenues. Margins continue to expand as it moves into more consulting and technological services.
Over the past nine months, the company grew organically by over 7%. It has been a great consolidator of the engineering industry. It still has substantial opportunities for mergers/acquisitions to propel growth.
Alimentation Couche-Tard: A retailer with a large market to acquire
While Alimentation Couche-Tard (TSX:ATD) stock is up only 1% in 2024, it is up 33% over the year and 114% over the past five years. That is a 16.4% CAGR at that time.
Like WSP, Couche-Tard has consolidated a very fragmented sector over the past few decades. Convenience stores/gas stations are not exactly high-margin businesses. However, Couche-Tard has utilized operating expertise, brand power, and scale to create a sector-leading, cash-yielding machine.
Couche-Tard continues to have a large market to consolidate. It also has a significant opportunity to keep growing its store count as well as its product and service array. With a strong balance sheet and a smart executive team, this stock could continue to pursue mid- to high teens returns in the years ahead.
Hammond Power: A top-performing Canadian stock
Hammond Power Solutions (TSX:HPS.A) is up 23% in 2024, 293% over a year, and 1,468% over the past five years. That is a 73% CAGR over the past five years. Hammond has been one of the best-performing Canadian stocks over the past year and five years.
Hammond is not the most exciting business. It manufactures transformers and specialized power solutions. Demand for its high-end products has rapidly accelerated due to trends like electrification and digitization. Everything from electric vehicle charging stations to data centres to factories requires its products.
The company has grown revenues and earnings per share over the past three years by respective 26% and 63% CAGRs. Despite its impressive growth, it only trades for 18 times earnings today.
Hammond has a strong balance sheet, high-quality products, and expanded manufacturing capacity to meet demand. Notwithstanding its strong returns to date, this stock could still deliver solid returns ahead.