Despite the volatile environment, the S&P/TSX Composite Index is up 5.9% this year. The following three stocks have outperformed the broader equity markets year to date and could continue their uptrend, given their long-term growth potential and solid underlying businesses.
goeasy
goeasy (TSX:GSY) is a subprime lender that has delivered 9.6% returns this year, outperforming the broader equity markets. Its solid quarterly performances have driven its stock price. Earlier this month, the company posted an impressive first-quarter performance, with its topline growing by 24% to $357 million. During the quarter, the lender witnessed a record volume of credit applications, an increase of 41% from the previous year, driving its loan originations to $686 million. At the end of the quarter, the loan portfolio stood at $3.9 billion, 29% higher than the previous year.
Amid the topline growth and expansion of operating margin, the goeasy’s net income was up 15% to $58.9 million. Meanwhile, removing special items, its adjusted net income grew 25% to $66.3 million, while its adjusted EPS (earnings per share) grew by 24% to $3.83. Also, its net charge-off rate stood at 9.1%, within its 8.5-9.5% guidance.
Further, goeasy is expanding its point-of-sales by adding new merchants and making strategic initiatives to drive growth across auto, retail, home, and healthcare verticles. Besides, its wide range of product launches, new distribution channels, and strengthening of its digital infrastructure could grow its loan portfolio and revenue. Meanwhile, next-gen credit model adoption and enhanced underwriting and income verification processes could lower the default rate, thus improving the company’s profitability.
Along with goeasy’s healthy growth prospects, its consistent dividend growth and attractive NTM (next 12 months) price-to-earnings multiple of 9.7 makes it an ideal buy.
Dollarama
Dollarama (TSX:DOL) has delivered impressive returns of 30% this year amid its solid operating performance and healthy growth prospects. Given its superior direct sourcing model and efficient logistics, the company is able to offer consumer products at attractive prices. So, the discount retailer continues to enjoy healthy same-store sales even during challenging periods. In the recently reported fourth-quarter earnings that ended on January 28, the company posted solid same-store sales growth of 8.7%.
Supported by healthy same-store sales and the net addition of 65 stores over the last four quarters, Dollarama’s revenue grew by 11.3%. Besides, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by 19.5% to $558.9 million. Also, its adjusted EBITDA margin expanded from 31.7% to 34.1%.
Further, Dollarama’s management expects to increase its store count to 2,000 by fiscal 2031 from 1,551 at the end of fiscal 2024. Given its quick sales ramp-up and low average payback period for new stores, new store additions could continue to drive its financials. Besides, its subsidiary Dollarcity, where Dollarama owns a 50.1% stake, has plans to expand its footprint across Latin America, which could increase its contribution towards Dollarama. Given its healthy long-term growth potential, I am bullish on Dollarama.
Waste Connections
Waste Connections (TSX:WCN) is a waste management company that collects, transfers, and disposes of non-hazardous solid waste. Supported by solid performance and strategic acquisitions, WCN has returned 514% over the last 10 years at an annualized rate of 19.9%. Continuing its uptrend, the stock is up 14.4% this year, outperforming the broader equity markets.
As of April 24, Waste Connections had completed several acquisitions, which could add US$375 million to its top line. Meanwhile, the waste hauler has considered this year as one of its busiest years ever. So, its acquisitions could continue. Additionally, driving its organic growth, the company is developing several renewable gas or RNG (renewable natural gas) facilities, with three becoming operational this year. The company’s management is also confident that these facilities could contribute an incremental $200 million in annual EBITDA from 2026. Given the essential nature of its business and healthy growth prospects, I believe Waste Connections could be an excellent long-term buy.
