The TSX Composite Index hit a fresh all-time high of around 22,362 in April 2024 amid optimism surrounding upcoming interest rate cuts and better-than-feared economic conditions. While the market has seen a downward correction of late to currently trade about 2.8% lower from its record highs, the overall sentiment remains largely positive as the central banks in the United States and Canada gear up to ease their monetary stance.
But if you’re looking to make next-level gains from stock investing, you should look beyond the broader market and focus on fundamentally strong individual growth stocks that have the potential to deliver solid returns in the long run. In this article, I’ll highlight two such TSX growth stocks you may want to watch closely for any buying opportunities on a dip. Both of these stocks have delivered stellar returns in the past five years and have strong growth drivers for the future.
Constellation Software stock
Constellation Software (TSX:CSU) could be an amazing TSX growth stock for investors looking to benefit from the rising demand for software solutions across various industries, especially in the post-pandemic era. This Toronto-headquartered tech company primarily focuses on acquiring and managing quality software businesses that serve public and private organizations globally. It currently has a market cap of $75.1 billion and trades at $3,544.28 per share after rallying by around 29% over the last six months and nearly 200% in the last five years.
Last year, Constellation Software’s revenue rose 27% YoY (year over year) to US$8.4 billion, underpinned by consistent organic growth and the successful integration of new strategic acquisitions. These factors also helped the company post a strong 22.4% YoY increase in its adjusted annual earnings to US$63.50 per share.
Also, Constellation showcased impressive cash-generation capabilities, with free cash flow available to shareholders rising by an impressive 36% to US$1.16 billion for the year. This robust cash flow provides ample capacity for reinvestment in strategic future initiatives to drive growth, which could help CSU stock continue soaring.
goeasy stock
goeasy (TSX:GSY) is the second top TSX growth stock you may want to add to your watchlist right now. This Mississauga-based company provides alternative financial services to subprime borrowers in Canada. It has a market cap of $3 billion as its stock trades at $176.04 per share after inching up close to 59% in the last six months. Compared to Constellation Software, GSY stock has yielded even stronger returns of 262% over the last five years. Besides that, it also offers a decent 2.6% annualized dividend yield.
In 2023, goeasy posted a record annual revenue of $1.3 billion as its loan originations and portfolio continued to expand. Interestingly, the company’s same-store revenue has been growing positively for 55 consecutive quarters.
goeasy’s focus on clients with weaker credit histories or lower incomes gives it the ability to thrive even in adverse economic conditions. This is one of the key reasons why the company has been able to reward investors with dividends for two decades, while it has raised dividends for 10 consecutive years, making this TSX growth stock attractive even for long-term income investors.
