Investors planning to allocate their savings towards long-term financial goals like retirement could consider investing in stocks. Notably, stocks outperform most asset classes in the long term. However, one should take caution and consider investing the shares of fundamentally strong companies.
Thankfully, the TSX has several such stocks that have consistently outperformed the broader markets and delivered above-average returns. Against this backdrop, let’s look at three Canadian stocks that can potentially generate solid returns in the long term. These stocks will likely outshine the market averages and help you retire rich.
goeasy
goeasy (TSX:GSY) is a compelling long-term bet to create wealth for retirement. Shares of this non-prime lender have grown at a compound annual growth rate (CAGR) of approximately 34% in the last five years, beating the TSX by a wide margin. Further, it enhanced its shareholders’ returns via increased dividend payments.
goeasy stock’s solid growth is backed by its strong financial performance. For instance, its revenue sports a five-year CAGR of 19.82% (as of December 31, 2023). At the same time, its earnings per share (EPS) grew at a CAGR of 31.9%.
The momentum in goeasy’s business will likely be sustained, driving its share price higher. Its diversified revenue sources, large subprime lending market, higher loan originations, and stable credit and payment performance will likely support its top and bottom lines growth. Also, its focus on controlling expenses and improving operational efficiency bodes well for growth.
Moreover, goeasy could continue to increase its dividend at a decent pace on the back of double-digit earnings growth. Notably, goeasy stock is trading at a next 12-month price-to-earnings ratio of 10.3, which is attractive due to its ability to grow earnings at a double-digit rate and a forward dividend yield of about 2.7%.
Dollarama
Dollarama (TSX:DOL) is another top stock for investors looking for capital gains, regular income, and stability. Thanks to its defensive business model and value-pricing strategy, this retailer performs well in all market conditions. Further, its stock has delivered notable gains over the past five years. For instance, Dollarama stock is up about 192% in five years, reflecting a CAGR of nearly 24%. Further, Dollarama has consistently increased its dividend over the past decade.
Dollarama sells everyday items at low fixed price points. This will likely drive traffic and support its overall revenues. Moreover, the company’s extensive store network and focus on increasing brand awareness will likely contribute to its top-line growth rate.
Furthermore, Dollarama’s direct sourcing strategy, efforts to reduce merchandise costs, and diversifying its product offering will likely cushion its earnings and drive dividend payouts.
Shopify
Investors could consider investing in the technology company Shopify (TSX:SHOP). Shares of this e-commerce platform provider are up about 344% in five years, reflecting a CAGR of 34.7%. Shopify will likely benefit from the ongoing shift in selling models towards omnichannel platforms. This will enable the company to deliver durable revenue growth.
Further, its ability to grow the number of active merchants on its platform will drive its gross merchandise volume and sales. Also, higher subscription pricing and improving take rate will support its revenue and earnings.
The company is transitioning towards an asset-light business model, focusing on lowering expenses and delivering sustainable profitability in the long term. Moreover, the growing adoption of its products and expansion of its offerings will likely accelerate its growth rate.
