Buying and holding fundamentally strong Canadian stocks with solid growth prospects can help you generate significant wealth in the long term. However, investors should focus on diversifying their portfolios to reduce risk and enhance overall returns.
Against this backdrop, let’s look at three Canadian stocks with significant growth potential that are likely to deliver above-average returns over the next decade.
goeasy
Speaking of long-term winners, goeasy (TSX:GSY) stands out for its ability to deliver solid financials and above-average returns. For instance, goeasy’s revenue has increased at a compound annual growth rate (CAGR) of more than 20% in the last five years. Thanks to the leverage from higher sales, its earnings per share (EPS) grew at a CAGR of about 28% during the same period. Its robust financial performance boosted its share price, which gained over 293% in five years.
Besides delivering massive capital gains, goeasy enhanced its shareholders’ value through higher dividend payments.
Looking ahead, the momentum in goeasy’s business will likely be sustained, which will support its share price over the long term. goeasy is the leader in Canada’s non-prime lending sector and is poised to capitalize on this large addressable market with its wide product range, omnichannel offerings, geographical expansion, diverse funding sources, and solid credit underwriting capabilities.
The expected increase in sales, steady credit performance, and operating efficiency will bolter goeasy’s earnings growth, driving its dividend payments and share price.
Shopify
Shopify (TSX:SHOP) is a compelling investment for long-term investors seeking to capitalize on secular tailwinds such as digital transformation. The company provides infrastructure supporting multi-channel commerce and is likely to gain from the ongoing digital shift. Further, its ability to attract new merchants to its platform, retain revenue from existing ones, and higher revenues from new and existing customers augur well for growth.
Shopify’s unified commerce platform, expansion of gross merchandise volume, and higher penetration of Shopify Payments position it well to deliver durable revenue growth and gain market share. Further, Shopify’s focus on innovative product offerings and the addition of new sales and marketing tools will likely expand its merchant base and support future revenue growth.
The company’s expansion into international markets and introduction of more products in these new markets will accelerate its growth rate. Further, its transition toward an asset-light business model, cost savings, focus on delivering sustainable earnings, and integration of artificial intelligence (AI) technology in its offerings are positives and will support its growth.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) offers a combination of stability, income, and growth, making it an attractive stock for long-term investors. The company operates convenience stores, retails fuel, and offers electric vehicle (EV) charging. Its defensive business model, ability to drive traffic in all market conditions, and strategic acquisitions position it well to consistently deliver solid financials, which support its share price and dividend payments.
For instance, ATD’s revenue and earnings have grown at a CAGR of 6.2% and 15.2% over the past decade. Moreover, it increased its dividend per share at a CAGR of 25.6% during the same period. Thanks to its impressive financials and focus on enhancing shareholders’ value, Couche-Tard stock has grown at a CAGR of over 17% in the past decade, delivering an overall capital gain of about 379%.
Alimentation Couche-Tard’s value pricing strategy, extensive store presence, and focus on improving operational efficiencies will likely drive its future sales and earnings. In addition, its emphasis on strategic acquisitions will likely expand its store base, drive traffic, and accelerate its growth rate.
