1 Growth Stock With Legit Potential to Outperform the Market

After beating the market for several weeks, this growth stock is set to deliver even better returns.

| More on:
Growing plant shoots on coins

Image source: Getty Images

Stock market investing is an excellent way to get good returns on your capital. As an investor, nothing is better than getting market-beating returns. Whether it is growth through capital gains, shareholder dividends, or both, the TSX boasts plenty of opportunities for savvy investors.

Considering the state of the economy, relying solely on your job for income is a big mistake. When you have money set aside, leaving it in a bank to earn interest income cannot help you keep pace with inflation. With the money invested in the right growth stocks, you can get far better returns to achieve your goal of financial freedom.

This is why today we will look at a top TSX growth stock that can offer you market-beating returns through capital gains and dividends. This stock has already outperformed the rest of the market this year, and it looks set to continue delivering great results.

Franco-Nevada

Franco-Nevada (TSX:FNV) is a mining company with a focus on gold royalties and streaming headquartered in Toronto. As of this writing, it trades for $163.32 per share, up by 9.94% year to date. In the same period, the S&P/TSX Composite Index is up by 4.86%.

The Canadian benchmark index indicates the state of the broader Canadian stock market. While it is up significantly this year, Franco-Nevada stock has outperformed the market. To make things even better, the stock also pays its shareholders quarterly dividends at a 1.21% dividend yield.

Financially strong company

FNV stock is a gold-focused royalty and streaming company. However, it also boasts a diversified portfolio that also includes assets related to other precious metals, gas, oil, and other commodities. The company’s business model allows it to enjoy a lower degree of risk than other mining companies in its operations.

Since it focuses on royalties and streaming, it also generates more stable cash flows than other peers in the mining industry.

The business model allows FNV stock to enjoy considerable financial strength. Its earnings report for the first quarter in fiscal 2024 saw it report $307.4 million in earnings and its net income was $174.9 million. In the same quarter last year, its earnings and net income were $300.2 million and $158.1 million, respectively.

Due to improved cost efficiencies and higher gold prices, FNV stock also reported earnings before interest, taxes, depreciation, and amortization (EBITDA) at $249.7 million for the quarter, showing that its performance keeps improving each quarter.

Foolish takeaway

Over the last five years, the share prices for FNV stock are up by 55.82%. In the same period, the Canadian benchmark index has seen a 34.26% growth, highlighting the fact that FNV stock has outperformed the stock market for a while. Compared to other mining stocks, FNV stock also has lower volatility due to its business model.

Due to macroeconomic uncertainties, gold continues to trend upward. Combined with inflationary pressures, gold prices might keep climbing. These factors mean there is more potential for Franco-Nevada stock to deliver growth due to better profitability. The company’s diversification into other assets also offers it a good hedge against fluctuations in gold prices.

FNV stock has also increased its dividends for the last ten years, with its payouts covered comfortably by earnings. It can be a good stock to own to enjoy market-beating returns for the coming years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Investing

A miner down a mine shaft
Metals and Mining Stocks

1 Canadian Mining Stock to Buy and Hold Forever

Cameco (TSX:CCO) stock is looking way too cheap to ignore after the latest correction off highs.

Read more »

Dollar symbol and Canadian flag on keyboard
Tech Stocks

2 Canadian Stocks to Watch While They’re Still Dirt Cheap

These two Canadian stocks offer ample opportunities as the world shifts into not just AI but cybersecurity needs.

Read more »

Pile of Canadian dollar bills in various denominations
Investing

2 Stocks to Buy Right Now With $5,000

Buy Bank of Nova Scotia (TSX:BNS) and another top financial stock with an extra $5,000.

Read more »

A person looks at data on a screen
Investing

The Best Stocks to Invest $500 in Right Now

Canadian investors can own this entire basket of five top stocks for less than $500 today.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, July 18

Despite yesterday’s negative reversal, the TSX Composite benchmark still trades with solid 4.5% month-to-date gains.

Read more »

A stock price graph showing growth over time
Tech Stocks

1 Hidden Catalyst That Could Ignite Dye & Durham Stock 

Dye & Durham stock surged more than 15% in the last two weeks. What is igniting the growth after a…

Read more »

Cogs turning against each other
Dividend Stocks

How Interest Rate Cuts Affect REITs

Now is a good time to investigate Canadian REITs and take a position in the form of stocks or exchange…

Read more »

a person searches for information on the internet
Tech Stocks

Before You Buy Nvidia: Here’s An AI Stock I’d Buy First 

Nvidia is the first stock that comes to your mind for AI. However, consider diversifying your AI stocks across the…

Read more »