Last week, the Labor Department reported that the United States’s Consumer Price Index fell 0.1% in June compared to May. It was the first month-on-month decline in over four years. With inflation showing signs of easing, investors believe the Federal Reserve could slash its benchmark interest rates sooner. Propelled by the optimism, the S&P/TSX Composite Index rose 0.6% on Friday and is trading 3.7% higher this month.
Amid improving investors’ sentiments, investors should consider buying the following three top Canadian growth stocks.
Dollarama
Dollarama (TSX:DOL) is a discount retailer that has delivered impressive returns of 778% over the last 10 years at an annualized rate of 24.2%. Its aggressive expansion and solid underlying business drove its financials, supporting its stock price growth. It has adopted a direct sourcing method, acquiring higher bargaining power while eliminating intermediatory expenses. Besides, its effective logistics have also allowed the company to offer products at attractive prices, thus enjoying healthy same-store sales even during a challenging macro environment.
The discount retailer has also expanded its store count from 652 in fiscal 2011 to 1,569 as of April 28. Supported by these expansions, the company’s revenue and net income have grown at a CAGR (compound annual growth rate) of 10.8% and 16.9%, respectively. Also, its adjusted EBITDA margin has expanded from 16.5% in fiscal 2011 to 29.7% in the first quarter of fiscal 2025. Supported by these solid financials, the company has returned $6.5 billion to its shareholders through share repurchases and $649 million through dividends.
Meanwhile, Dollarama’s management has planned to increase its store count to 2,000 by fiscal 2031. Given its capital-efficient business model and quick sales ramp-up, these expansions could boost its financials in the coming years. Besides, its subsidiary Dollarcity, where Dollarama owns 60.1%, has planned to add over 500 stores to increase its count to 1,050 by fiscal 2031. Considering these growth prospects, I believe Dollarama is an ideal growth stock to have in your portfolio.
goeasy
Another growth stock I am bullish on would be goeasy (TSX:GSY), which offers leasing and lending services to subprime customers. The company has been driving its financials consistently through its wide range of product offerings, multiple distribution channels, and extensive presence nationwide. Over the last five years, its revenue and diluted EPS (earnings per share) have grown at a CAGR of 20% and 32.2%, respectively.
Despite the strong growth, goeasy has acquired a small percentage of the Canadian subprime credit market. So, it has substantial scope for expansion. Besides, its enhanced underwriting and income verification process and next-gen credit models could lower its risks, thus boosting its profitability. The subprime lender has also rewarded its shareholders by raising its dividends at an annualized rate of around 30% for the previous 10 years, with its forward yield at 2.6%.
Waste Connections
Waste Connections (TSX:WCN) is a waste management company that collects, transfers, and disposes of non-hazardous solid waste in secondary and exclusive markets in the United States and Canada. Along with its organic growth, the company has expanded its footprint through strategic acquisitions. From 2016 to 2023, it acquired $12 billion in assets, boosting its financials and stock price. Over the last 10 years, the company has delivered around 645% returns at an annualized rate of 22.3%.
Meanwhile, WCN expects to normalize its acquisition activities this year onwards while focusing on organic growth and returning capital to its shareholders. It is constructing several renewable natural gas facilities, with management projecting to put three facilities into service this year. Also, management expects these facilities to contribute an incremental annual EBITDA of $200 million from 2026. These growth initiatives could boost its financials in the coming years. Besides, the company has rewarded its shareholders by raising its dividends at an annualized rate of 14% since 2010.
