The ongoing bull market has driven the valuations of several companies across sectors higher in the last 18 months. However, investors should note that while valuations might seem expensive, it makes little sense to await a pullback, as it’s almost impossible to time the market. Instead, long-term Canadian investors should consider adding quality stocks to their portfolio at regular intervals, as a disciplined approach is key to wealth building.
Keeping this in mind, here are my top two TSX stocks you can buy right now.
goeasy stock
Valued at $3 billion by market cap, goeasy (TSX:GSY) has returned close to 700% to shareholders in the past decade. If we adjust for dividend reinvestments, cumulative returns are closer to 900%. Despite these stellar returns, goeasy stock trades at a cheap forward price-to-earnings multiple of 11 times. Comparatively, it is forecast to expand earnings at a compound annual growth rate of 12% in the next five years.
goeasy provides non-prime leasing and lending services to customers in Canada. It offers unsecured and real estate-secured installment loans, such as personal, home equity, and auto loans. Moreover, its easyhome segment leases household furniture, appliances, electronics, and computers.
While goeasy is part of a cyclical lending sector, it has increased sales from $394 million in 2019 to $746 million in 2023. In the last 12 months, its sales have risen by 17% year over year to $794.3 million. An asset-light business has enabled it to increase its operating income from $107.6 million in 2019 to $316 million in 2023.
goeasy’s second quarter was the strongest in its history, primarily due to record originations, loan book growth, stable credit, and record earnings. It surpassed $4 billion in gross consumer loan balances and added $450 million of debt funding capacity, solidifying its position as a leader in Canada’s non-prime consumer credit market.
In the second quarter (Q2), goeasy’s credit application volume rose 34% to 665,000, while loan originations rose 24% to $827 million.
goeasy stock continues to grow at an enviable pace despite a challenging macro environment. It currently trades at a 27% discount to consensus price target estimates.
Restaurant Brands International stock
Valued at $43.4 billion by market cap, Restaurant Brands International (TSX:QSR) is among the largest companies in Canada. It owns and operates quick-service brands such as Burger King, Tim Hortons, Popeyes, Firehouse Subs, and Carrols.
In 2023, Restaurant Brands reported system-wide sales growth of 12% year over year as revenue surpassed US$7 billion and its net income totalled US$1.7 billion. The potential for restaurant growth across smaller brands such as Carrols and Firehouse Subs should be a key driver of sales in the upcoming decade.
For instance, Firehouse Subs ended 2023 with 1,200 locations and US$1.1 billion in system-wide sales. Restaurant Brands recently closed the acquisition of Carrols and is now working to remodel 600 locations over the next four years, allowing it to re-franchise most of the portfolio to smaller owner-operators.
In the June quarter, Restaurant Brands International grew comparable sales by 1.9% while net restaurants were up 4%, increasing system-wide sales by 5% and adjusting operating income growth by 9.3%.
The fast-food chain is now focused on strengthening its long-term positioning in the U.S. and China, the world’s two largest economies.
Priced at 20 times forward earnings, QSR stock is reasonably priced, given that its earnings are forecast to grow at a compound annual growth rate of almost 12% in the next five years. Moreover, it also offers shareholders a forward dividend yield of 3.3%.
