The Canadian stock market has gone up by nearly 10% so far in 2024, as investors continue to bet that declining interest rates in the country are likely to boost economic activity and consumer spending in the coming years. These factors could directly lead to an increase in corporate profits. This is one of the key reasons why many TSX-listed consumer and industrial stocks have outperformed the broader market on a year-to-date basis.
However, to beat the market, it’s important to look beyond the short-term gains and look for stocks with strong financial growth prospects that could deliver solid returns over the longer term. In this article, I’ll talk about two rallying Canadian stocks you may want to add to your watchlist right now and buy on a dip to benefit from their long-term growth potential.
NFI Group stock
If you don’t know it already, NFI Group (TSX: NFI) is a Winnipeg-headquartered company that primarily focuses on manufacturing buses and motor coaches, including electric and hybrid buses, for public transit systems and commercial enterprises. In 2024 so far, NFI stock has rallied by more than 40%, outperforming the TSX Composite benchmark by a wide margin. With this, it trades at $19.19 per share with a market cap of $2.3 billion.
The recent optimism in NFI stock could be attributed to its solid operational and financial results for the second quarter of 2024. During the quarter, the company’s total revenue rose 28.9% YoY (year over year) to US$851 million. Its deliveries last quarter jumped 34% from a year ago to 1,246 equivalent units, including 23% of zero-emission buses.
On the profitability side, the Canadian bus manufacturer also registered a turnaround by reporting an adjusted quarterly net profit of US$3.1 million. This not only reflected a big improvement over its adjusted net loss of US$35.2 million in the second quarter of 2023 but also beat Street analysts’ expectations of a US$2.9 million loss.
As NFI continues to focus on ramping up its production further to support its robust backlog of orders, I expect its share price to continue outperforming the broader market by a wide margin in the future.
Loblaw stock
Loblaw Companies (TSX: L) could be another rallying Canadian stock you may want to add to your watchlist right now. This Brampton-based retail giant operates a large network of supermarket and pharmacy chains across the country. It has a market cap of $52.6 billion as Loblaw’s TSX-listed stock trades at $172.31 per share after climbing by 34.3% year to date.
While recent weakness in consumer spending has affected the financial growth of many retail companies, Loblaw’s diversified business continues to perform well. In the last 12 months, its sales rose 3.8% YoY to $60.3 billion. More importantly, its adjusted earnings during the same period soared by 12% YoY to $8.13 per share.
As Loblaw continues to focus on its drug retail segment and e-commerce growth, its profitability could improve further in the coming years, making it an attractive stock to buy on the dip and hold for the long term.
