Growth stocks are famous for their higher growth potential and for creating significant wealth for their shareholders over time. The TSX has several fundamentally strong growth stocks that have consistently generated above-average returns and outperformed the benchmark index.
Against this background, let’s look at four Canadian stocks likely to witness rapid growth and beat the broader markets with their returns.
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goeasy
Let’s start with the financial services company goeasy (TSX:GSY). This subprime lender is famous for rapidly growing its revenue and earnings, which, in turn, drives its share price higher. For example, goeasy’s revenue and earnings per share (EPS) increased at a compound annual growth rate (CAGR) of 19% and 28.6%, respectively, between 2013 and 2023. Moreover, its EPS sports a CAGR of 32.2% in the past five years.
Investors cheered goeasy’s stellar financial performance, reflected through a rally of 1,223% in the past 10 years. Moreover, goeasy enhanced its shareholder’s returns by uninterruptedly increasing its dividend over the past decade.
The momentum in goeasy’s business will likely sustain, considering its leadership in the large subprime lending market. Moreover, goeasy’s wide product range, increasing geographical footprint, diverse funding sources, and solid credit underwriting capabilities could continue to boost its revenue and earnings. goeasy’s forward price-to-earnings multiple of 11.5 appears attractive, given its higher earnings growth potential and decent yield.
Constellation Software
Shares of leading Canadian tech companies could be a valuable addition for investors looking for growth stocks. Investors could consider investing in Constellation Software (TSX:CSU) stock among high-quality names.
It’s worth noting that Constellation Software stock has grown at a CAGR of 29.6% in the last five years, generating a capital gain of about 267%. This above-average return reflects the company’s broad portfolio of software businesses and large and growing customer base.
Looking ahead, Constellation Software’s diversified portfolio and custom solutions position It well to capitalize on evolving demand trends. Its strategy of acquiring and integrating small- to mid-sized vertical market software (VMS) companies should continue to drive its financials and support the upward trend in the stock.
Celestica
Celestica (TSX:CLS) is another top growth stock investors could consider investing in now. The company provides innovative supply chain solutions through its Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS) businesses. What stands out is that Celestica has exposure to sectors benefitting from solid secular tailwinds, such as artificial intelligence (AI) and vehicle electrification. This provides Celestica with a solid platform for future growth.
Celestica stock rallied significantly, gaining nearly 313% in one year. Further, CLS stock is up about 790% in five years, reflecting an impressive CAGR of 54.73%.
The company is poised to gain from hyperscalers’ higher capital expenditures as they adopt and deploy AI computing. Moreover, the penetration of electric vehicles (EVs) is expected to increase, which presents solid growth opportunities in the long run.
Shopify
Shopify (TSX:SHOP) is another top Canadian stock to buy and hold forever. Despite experiencing a pullback and trading significantly below its peak levels, which can be attributed to the normalization of e-commerce demand post-COVID, Shopify is strategically positioned to benefit from the ongoing digital transformation.
The structural shift in selling models towards omnichannel platforms is poised to increase demand for Shopify’s products. This is expected to boost gross merchandise volumes and drive substantial revenue growth. Further, Shopify’s commitment to cost-reduction measures and its transition towards an asset-light business model are positive steps. These initiatives will support sustainable earnings growth, ensuring long-term profitability.
Adding to the positives, Shopify is integrating AI technology into its offerings. This will enhance its platform’s efficiency and user experience, driving higher adoption rates. Shopify’s solid competitive positioning in the e-commerce space, diverse product offerings, and focus on innovative product launches will likely boost its financials and share price.
