TSX stocks rebounded over the past year as concerns about a recession diminished and inflation moderated, creating conditions favourable for potential future interest rate cuts. While many stocks have experienced significant gains, there remains ample opportunity for further growth. Additionally, a handful of stocks are currently trading at discounted prices, presenting an attractive opportunity for investors to buy in at or near current levels.
Against this backdrop, let’s examine five fundamentally strong stocks with potential to generate above-average returns over the next five years.
Shopify
Shopify (TSX:SHOP) stock has gained nearly 70% over the past year. Despite this notable increase in share price, Shopify is an attractive investment to capitalize on the ongoing transition towards omnichannel platforms. This technology stock is poised to benefit from the increased number of active merchants on its platform, expansion of its offerings, and higher adoption of its products.
Supporting my optimistic outlook is Shopify’s dominant positioning in the e-commerce space, its shift toward an asset-light business model, and its focus on generating sustainable earnings in the long term. Adding to the positives, Shopify is experiencing an improvement in take rate and will likely benefit from higher subscription pricing.
Brookfield Renewable Partners
With the growing adoption of green energy, Brookfield Renewable Partners (TSX:BEP.UN) remains an attractive investment that can generate solid capital gains. Moreover, investors will likely benefit from the company’s focus on returning higher cash to its shareholders. This pure-play renewable energy company is poised to benefit from its highly contracted business, inflation indexation, and solid development pipeline.
Further, the company has almost 24,000 megawatts of advanced-stage development pipeline. These projects will soon secure power-purchase agreements, which will contribute significantly to its financials. Further, Brookfield is diversifying its cash flows and growing the contracted components of its business. This move will help stabilize its business, drive earnings, and support its share price.
goeasy
goeasy (TSX:GSY) is a solid stock for creating wealth. Shares of this subprime lender are up about 37% in one year and have consistently outperformed the broader market averages. goeasy’s stellar returns are backed by its ability to grow its revenue and profit at a double-digit rate. Meanwhile, it increased its dividend for nine consecutive years.
Higher loan originations, omnichannel offerings, a large subprime lending market, and efficiency improvements will likely drive its sales and earnings and support the uptrend in its shares over the next five years. In addition, goeasy could enhance its shareholders’ return through higher dividend payments.
Aritzia
Investors could consider adding Aritzia (TSX:ATZ) stock now (as it is trading well below its 52-week high). The fashion house is focusing on expanding its geographic presence by opening new boutiques. These new boutiques will support its top- and bottom-line growth and, in turn, its share price.
Further, Aritzia is focusing on improving its omnichannel offerings, introducing new styles, and enhancing its online customer experiences, all of which will likely re-accelerate its growth. The company’s top line is forecasted to increase at a mid-teens rate (annually) in the next five years. Moreover, higher sales and lower inventory management expenses will drive its earnings faster than sales and boost its stock price.
WELL Health
WELL Health (TSX:WELL) is the final stock on this list. The stock is trading at a significant discount, near the all-time low on the valuation front. Meanwhile, its revenue is growing rapidly, driven by higher omnichannel patient visits. In addition, WELL Health is profitable, which supports my bull case.
Notably, its extensive network of clinics, focus on strategic acquisitions and increase in omnichannel patient visits will accelerate its growth rate and drive WELL stock higher. Moreover, its investment in artificial intelligence technology will help the company expand its product base and support its future growth.
