Growth stocks can help you build lasting wealth. Here are some great growth stocks to keep your eyes on to target to buy on dips or at good valuations.
CP stock
Canadian Pacific Kansas City (TSX:CP) transports energy, chemicals, plastics, metals, minerals, consumer products, vehicles, and forest products between Canada, the United States, and Mexico. Over the past decade, it compounded its adjusted earnings per share by 11.6%, helping drive total returns of about 13.9% in the period. To put it in perspective, an initial investment of $1,000 would have turned into about $3,665.
The recent merger with Kansas City Southern could help drive double-digit earnings growth over the next few years, which is why the industrial stock trades at approximately $115 per share — a high price-to-earnings ratio (P/E) of about 29.5. The stock appears to be fully valued. And it would be safer if interested investors could grab shares at closer to $100.
Since rail companies are the backbone of the economy when the economies of the markets CP serves turn south as they always will at some point in the economic cycle, the business could take a hit. At such a time, the stock will likely be trading at a discount for long-term investment.
Alimentation Couche-Tard
It’s hard to ignore Alimentation Couche-Tard (TSX:ATD) when the business has executed so well over the decades, creating quality earnings throughout. In the last decade, the business increased its adjusted earnings per share by approximately 22% per year, which drove annual returns of roughly 19.7%. An initial investment of $1,000 would have turned into about $6,048.
Management has been prudent when making acquisitions. Other than seeking fitting acquisitions to expand its convenience store network, it has also kept its leverage in check by paying down its debt levels after large acquisitions. As a result, Couche-Tard also generates durably strong cash flows.
ATD data by YCharts
In the last 12 months alone, the stock is up 25%. At $82 per share, the growth stock also appears to be fully priced. Whenever the stock price dips or even simply stays stagnant for some time, it may be smart for investors to take a bite. Although small, its dividend is growing at a high rate — it has grown its dividend 10-fold over the last decade.
goeasy stock
Non-prime Canadian consumer lender, goeasy (TSX:GSY) has also done exceptionally well, growing its shareholder’s money by 40% over the last 12 months and 1,300% over the last decade! Over 10 years’ time, an initial investment of $1,000 would have turned into about $14,030 (i.e., 30% per year)!
It makes hefty interest income by accepting loans from people who are turned away by traditional financial institutions. For example, last quarter, its easyfinancial business segment earned a weighted average interest rate of 30.3% on its consumer loans. However, it is helping its customers, like new immigrants, to build a credit history or improve their credit scores so as to return them to traditional financial institutions in the future.
Over the last decade, the stock has been shareholder friendly, increasing its dividend by about 30% per year, including the recent dividend increase of almost 22%.
goeasy has its risks, too. The Liberal government is cracking down on the industry by capping the maximum allowable interest rate at 35% with the intention of weighing it down some more. During recessions, the stock can be hit hard, as well. Brave souls would jump in at such opportunities to potentially make big money in the long run, though. The stock is considered to be fairly valued at about $177 per share at writing.
