Long-term investing is not just about compounding. It also helps mitigate volatility and potential downsides. Investors can earn superior returns by acquiring quality stocks and holding them over longer horizons. Now that we understand the importance of long-term investing let’s look at three quality stocks you can buy and hold for the next 20 years to reap superior returns.
Docebo
The demand for LMS (learning management system) is growing amid growth in remote working and online learning, thus expanding the addressable market for Docebo (TSX: DCBO), which offers a highly customizable enterprise LMS. Last month, the company reported an impressive 2023 performance, with its revenue growing by 27%. In 2023, the company added 365 customers to expanded its customer base to 3,759. Besides, its ARPU (average revenue per user) grew 11.7% to $51,689.
Docebo also generated $2.8 million in net income last year. However, removing special or one-time items, its adjusted net income stood at $21.2 million, compared to the previous year’s $2.3 million. It also generated free cash flow of $20.1 million, representing 11% of its revenue. Moreover, it ended the year with cash and cash equivalents of $72 million, thus well-equipped to fund its growth initiatives.
Meanwhile, I expect the uptrend in Docebo’s financials to continue amid the expansion of its addressable market and growth initiatives. Besides, most of its customers have signed long-term contracts, thus providing stability to its financials. The company’s management expects its revenue in the first quarter of 2024 to come between $51 million and $51.3 million, representing over 23% growth from the previous year’s quarter. Its adjusted EBITDA margin could also improve from 5.3% to 12.5%–13.5%. Given its growing financials and healthy growth potential, I am bullish on Docebo.
goeasy
Second on my list would be goeasy (TSX: GSY), which offers leasing and lending services to subprime customers. Over the last five years, the company has grown its revenue and diluted EPS (earnings per share) at an annualized rate of 19.8% and 31.9%, respectively. During this period, its loan portfolio has grown at an annualized rate of 34.3% to $3.7 billion.
Meanwhile, the company is experiencing stable credit and payment performance, with its net charge-off rate declining from 9.2% in 2022 to 8.9% in 2023. Besides, its other operating metrics, such as efficiency rate and allowance for future credit losses, have improved compared to the previous year.
Further, goeasy recently launched a digital solution that provides customers with one-stop access to all its credit products. The lender continues to focus on developing new products and strengthening its digital infrastructure, which could help scale its business and improve its operating efficiency. Amid these growth initiatives, goeasy’s management expects its loan portfolio to grow by 65% over the next three years. Also, its revenue could grow at 12.9% until 2026.
goeasy also offers a forward dividend yield of 2.92% and trades at an attractive NTM (next 12 months) price-to-earnings multiple of 9.6, making it an attractive buy.
Waste Connections
Waste Connections (TSX: WCN) is a Canadian waste management company that operates in secondary and exclusive markets in the United States and Canada. It has expanded its footprint through an aggressive acquisition strategy. In 2023, the company made 13 acquisitions, which could contribute $215 million of annualized revenue. In February of this year, it also acquired 30 energy waste treatment and disposal facilities for $1.1 billion, which could contribute another $325 million to its annual revenue.
On the sustainability front, WCN is expanding its Renewable Natural Gas (RNG) and resource recovery facilities. It is also constructing two recycling facilities that could become operational this year. Given the essential nature of its business and continued acquisitions, I believe WCN would be an excellent long-term buy.
