The TSX proved resilient despite a prolonged high interest rate environment and macro uncertainty. Thanks to the renewed investors’ confidence, several Canadian stocks have witnessed stellar recovery and delivered above-average returns over the past one-and-a-half years.
Looking ahead, the stock market will likely benefit from the expected decline in interest rates and improving corporate earnings. Further, several fundamentally strong Canadian companies are poised to deliver durable revenue growth and sustainable earnings, making them a compelling investment option.
Against this background, here are five Canadian stocks you can confidently invest $500 in right now. These companies have the potential to outperform the broader markets by a wide margin.
Dollarama
Let’s begin with Dollarama (TSX:DOL), a no-brainer stock for investors seeking growth, income, and stability. The discount retailer’s value pricing strategy and extensive store base position it well to drive traffic, likely supporting its financials and share price. Dollarama will likely enhance its shareholders’ value through higher dividends thanks to its growing earnings base.
Dollarama stock has appreciated about 168% in five years, beating the benchmark indices by a significant margin. Further, the discount retailer’s defensive business model, low pricing, direct sourcing, and ongoing investments to expand its footprint augur well for growth. This implies that the momentum in Dollarama stock will likely be sustained, and the company could continue generating above-average returns.
goeasy
goeasy’s (TSX:GSY) ability to consistently grow its sales and earnings at a solid double-digit rate makes it a compelling investment. Thanks to its robust financials, shares of this subprime lender have grown at a compound annual growth rate (CAGR) of an impressive 32.7% CAGR in five years, resulting in a capital gain of 313.7%. Furthermore, goeasy amplified its shareholders’ returns through higher dividend payments.
goeasy’s growing consumer loan portfolio, large addressable market, diversified funding sources, and geographical expansion position it well to deliver solid sales. Moreover, leverage from higher revenue, steady credit performance, and improving operating efficiency will likely cushion its earnings and drive its share price and dividend payouts.
Canadian Natural Resources
Investors could consider Canadian Natural Resources (TSX:CNQ). This oil and gas company’s diversified asset base and high-value reserves bode well for long-term growth. Canadian Natural Resources stock has risen 245% in five years. Further, management increased its dividend at a CAGR of 21% in the last 24 years. Its solid fundamentals and compelling returns make Canadian Natural Resources a lucrative investment option.
The energy producer’s high-value reserves and long-life asset base could continue to drive its top line. Further, the company’s cost-cutting measures, low maintenance capital requirement, and robust balance sheet augur well for future growth and will support its payouts.
Shopify
Shopify (TSX:SHOP) could be a valuable addition to capitalize on the shift towards multi-channel selling platforms. The stock has corrected significantly from its peak, providing an excellent buying opportunity for long-term investors. Further, its ability to drive merchandise volumes and deliver durable revenue growth in all market conditions is positive.
Shopify focuses on delivering sustainable earnings growth and transitioning toward an asset-light business model. Moreover, its innovative product launches, growing merchant base, and improving take rate bode well for growth.
Aritzia
Aritzia (TSX:ATZ) has a proven track record of generating impressive sales and earnings. Its strong financials will likely support its share price in the upcoming years. The company is focusing on opening new boutiques and expanding its presence in high-growth markets. Further, its emphasis on improving user experience on its e-commerce platform and the addition of omnichannel offerings will likely accelerate its growth.
As the company expands its geographic footprint and focuses on increasing brand awareness, its top line is projected to increase at a CAGR of 15-17% through 2027. Moreover, its earnings will likely grow at a faster pace than its sales, which will significantly boost its share price.
