Investors can create wealth by buying quality stocks and holding them for extended periods. While benefitting from compounding, investors should shield their financials from volatility and potential downsides. So, if you are looking for stocks to make long-term investments, here are my three top picks.
Dollarama
Dollarama (TSX:DOL) is a Canadian value retailer that offers a wide range of products at attractive prices. It has an extensive presence across the country, with over 1,550 stores. Last week, the discount retailer reported an impressive fourth-quarter performance, with its revenue growing by 11.3%. Solid same-store sales of 8.7% and a net addition of 65 stores during the fiscal drove its sales. After posting solid same-store sales growth of 15.9% in the previous year’s quarter, the company has continued its uptrend as its value proposition resonates with customers.
Meanwhile, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by 19.5%, while its adjusted EBITDA margin expanded from 31.7% to 34.1%. Gross margin expansion amid lower logistics costs and a decline in SG&A (selling, general, and administrative) expenses expanded its EBITDA margins. Besides, the increased contribution from Dollarcity, in which Dollarama owns a 50.1% stake, drove its net earnings. Its diluted EPS (earnings per share) grew 26.4% during the quarter.
Further, Dollarama’s management has provided optimistic guidance for fiscal 2025. The company expects to open 60 to 70 stores in fiscal 2025, while its same-store sales could grow by 3.5% to 4.5%. Besides, its gross margin could expand while its SG&A could fall as a percentage of total revenue. In the long run, the company hopes to increase its store count to 2,000 by 2031. Its quick sales ramp-up and lower average payback period have resulted in low capital intensity and high return on investment for its network expansion.
Dollarcity has also planned to add 318 stores over the next five years to increase its store count to 850 by the end of fiscal 2029. So, its contribution towards the company’s net income could continue to rise. Considering all these factors, I am bullish on Dollarama.
Waste Connections
Due to its impressive underlying business and continued expansion, Waste Connections (TSX:WCN) would be another solid long-term bet. It operates only in exclusive and secondary markets and thus faces less competition. The solid waste management company has expanded its footprint across the United States and Canada through aggressive acquisitions. Last year, the company made 13 acquisitions, which could contribute around US$215 million to its annualized revenue.
Continuing its acquisitions, WCN acquired 30 energy waste treatment and disposal facilities from Secure Energy Services in February. Together, these acquisitions could contribute US$325 million to its 2024 revenue. Further, the company is also focusing on organic growth and investing in growing its renewable natural gas (RNG) and resource recovery facilities, which could support its financial growth in the coming quarters. Meanwhile, WCN’s management expects its 2024 revenue and adjusted EBITDA to grow by 9.1% and 13.4%, respectively. Also, its adjusted EBITDA margin could expand by 120 basis points to 32.7%. So, its outlook looks healthy.
goeasy
I am choosing goeasy (TSX:GSY) as my final pick. It offers leasing and lending services to subprime customers. Over the last five years, the company’s loan portfolio has grown at a 34.5% CAGR (compound annual growth rate) to $3.7 billion by the end of 2023. Amid the expansion, its revenue and adjusted EPS have grown at an annualized rate of 19.8% and 31.9%, respectively.
Besides, its weighted average interest rate has declined from 40% in 2019 to 30.2% in 2023, which is encouraging. Also, the company’s net charge-off rate stood at 8.9% by the end of last year, closer to the lower end of its 8.5%–10.5% guidance. Meanwhile, the company is investing in strengthening its digital infrastructure and developing new products, which could expand its loan portfolio and drive its financials.
goeasy’s management projects its loan portfolio to reach $6 billion by 2026, representing a 65% increase from 2023. The expansion could grow goeasy’s revenue at an annualized rate of 12.9% while improving its operating margin from 38.1% in 2023 to 41% in 2026. So, given its healthy growth prospects, I believe the uptrend in goeasy’s financials and stock price could continue.
