Growth stocks can help investors generate above-average returns and build substantial wealth over time. Thus, investors should consider adding a few fundamentally strong growth stocks to their portfolios to achieve their financial goals faster. With this backdrop, let’s look at two fantastic TSX stocks to buy that could multiply your capital in the long term.
But before going into the details, it’s important to highlight that while growth stocks have the potential to deliver solid returns, they also carry higher risks. Therefore, investors should focus on diversifying their portfolios to reduce risk.
Shopify
Investors looking for fantastic growth stocks with the potential to deliver solid gains over time could consider investing in Shopify (TSX:SHOP). This Canadian tech company provides an e-commerce platform and is well-positioned to capitalize on the ongoing digital shift.
Shopify stock is down about 27% year to date, underperforming the broader market indices. Moreover, it has lost substantial value from the pandemic-led highs. This decline in Shopify stock comes amidst macro headwinds, such as high inflation and interest rates, which adversely impacted consumers’ discretionary spending.
While Shopify stock is down, its fundamentals remain strong, and the company continues to deliver solid sales growth. Looking ahead, Shopify’s dominant positioning in the e-commerce space, innovative product offerings, such as payment processing and sales and marketing tools, and geographic expansion position it well to drive its active merchant base and capitalize on the structural shift in selling models toward omnichannel platforms.
Further, increased adoption of its products provides cross-selling opportunities, which will boost its margins. Also, the integration of artificial intelligence (AI) technology in its offerings, focus on cost-reduction measures, and ongoing transition towards an asset-light business model set the base for profitable growth in the future.
Given the selloff, Shopify stock is trading at the next 12-month enterprise value-to-sales multiple of 7.1, which is much below its historical average. The correction in its price provides an excellent opportunity to buy this high-growth stock.
Aritzia
Luxury clothing company Aritzia (TSX:ATZ) is another fantastic growth stock to own right now. Aritzia has delivered above-average growth in the past and made investors rich. For instance, Aritzia stock has grown at an average annual growth rate, or CAGR, of over 19% in the last five years, delivering an overall capital gain of about 139%. This year, too, the stock grew by 55%, beating the TSX by a wide margin.
Aritzia stock’s uptrend stems from its solid financial performance. Since fiscal 2016, its net revenue has increased at a CAGR of 19%, and its adjusted net income grew at a CAGR of 13%. Moreover, the trend is likely to be sustained in the future, with its net revenue projected to grow at a CAGR of 15-17% through fiscal 2027.
Opening new boutiques, omnichannel offerings, and increasing brand awareness will likely support its growth. Further, the company’s investments in supply chain, technology, and marketing are positive.
Given multiple catalysts, Aritzia stock is poised to outperform the broader market and deliver above-average returns over time.
