Strong retail sales and a decline in month-on-month inflation appear to have raised investors’ hopes of sooner-than-expected interest rate cuts by the Federal Reserve of the United States. Amid the optimism, the S&P/TSX Composite Index has increased by 3.7% this month and is up 8.3% this year.
The following three TSX stocks have delivered superior returns this year, outperforming the broader equity markets. Given their long-term growth potential, I expect these companies to deliver multi-fold returns over the next 20 years.
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goeasy
goeasy (TSX:GSY) is a Canadian subprime lender that has delivered returns of over 20% this year, outperforming the broader equity markets. The company posted a solid first-quarter performance, with record loan originations of $686 million amid growing credit demand. These loan originations expanded its loan portfolio to $3.9 billion while driving its top line by 24% to $357 million.
Supported by its stable credit and payment performances, its net charge-off rate stood at 9.1%, within the management’s guidance of 8.5-9.5%. Amid top-line growth and expansion of operating margins, its adjusted EPS (earnings per share) grew by 24% to $3.83. Meanwhile, the company has acquired just 2% of the $218 billion Canadian subprime credit market, thus offering substantial scope for expansion.
Notably, goeasy offers a full suite of products and services to cover a wide range of customers. Besides, it is expanding geographically and strengthening its distribution channels, leading to loan originations and loan portfolio expansion. It has also tightened credit tolerance and adopted enhanced underwriting and income verification processes and next-generation credit models, which could reduce its default risks and boost profitability. Amid these growth initiatives, the company’s management projects its loan portfolio to reach $6 billion in 2026, representing a 64% increase from its 2023 levels. The expanding loan portfolio could drive its top line by 44% and expand its operating margin from 38.1% to 41%. Given its healthy growth prospects, I expect goeasy to deliver multi-fold returns over the next 20 years.
Savaria
Savaria (TSX:SIS), which produces and markets personal mobility products worldwide, has delivered solid performances over the last 10 years. Its top line and adjusted EPS (earnings per share) have grown at a CAGR (compound annual growth rate) of 27% and 11%, respectively. Supported by these solid performances, the company has delivered over 628% returns at an annualized rate of 22% over the last 10 years. Continuing its uptrend, SIS stock has returned 26% this year, beating the broader equity markets.
Meanwhile, the rising income levels and aging population could drive the demand for accessibility solutions, thus expanding Savaria’s addressable market. Given the company’s robust product development capabilities, advanced manufacturing facilities, and global distribution network, it can benefit from market expansion. Besides, it pays monthly dividends with its forward yield currently at 2.8% and trades at 1.5 times its projected sales for the next four quarters, making it an excellent buy.
Waste Connections
Another excellent long-term buy would be Waste Connections (TSX:WCN), a solid-waste management company that operates primarily in secondary and exclusive markets across the United States and Canada. It has returned over 25% this year amid a solid first-quarter performance. Meanwhile, given the essential nature of its business and healthy growth prospects, I expect the uptrend to continue.
After aggressive acquisitions, WCN expects normalized merger and acquisition activities in the coming years while focusing on organic growth and returning cash to its shareholders. It is constructing several renewable gas facilities, while the management expects to put around three facilities into service this year. Besides, investors could benefit from its consistent dividend growth, with the company raising its dividends at an annualized rate of 14% since 2010.
