The primary reason to invest in the stock market is to derive inflation-beating returns over time. While investing in low-cost, passively managed index funds such as the S&P 500 is a proven strategy to build long-term wealth, Canadians can consider allocating a portion of their savings towards quality growth stocks to generate outsized gains.
Here are two such no-brainer stocks you can buy with less than $1,000 today.
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North American Construction Group stock
Valued at $650 million by market cap, North American Construction (TSX: NOA) provides equipment maintenance and heavy construction services in Canada. Its Heavy Construction & Mining division offers constructability reviews, budgetary cost estimates, project management, contract mining, and other services. The company also has an equipment maintenance business that provides fuel and lube servicing, portable steaming, equipment inspections, parts, and component supply.
In the second quarter (Q2) of 2024, North American Construction reported sales of $330 million and an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $87 million, indicating a margin of 26.3%.
North American Construction’s stellar profit margins allow it to pay shareholders an annual dividend of $0.40 per share, translating to a forward yield of 1.6%. These payouts have risen from $0.08 per share in 2019, enhancing the effective yield significantly.
Priced at 5.6 times forward earnings, NOA stock is cheap, given that adjusted earnings are forecast to expand by 11% annually over the next five years. Analysts remain bullish on the TSX dividend stock and expect it to surge 60%, given consensus price target estimates.
Calian Group stock
Valued at $581 million by market cap, Calian Group (TSX: CGY) provides business services and solutions in verticals such as health, defence, security, aerospace, engineering, and information technology. Its Advanced Technology business offers developed products and engineering solutions for companies across various sectors. The Canada-based entity also offers primary care and occupational health services, clinic management, healthcare practitioner support, and psychological assessment services.
Its Learning segment provides training services and solutions in emergency management and advanced training technologies. Calian also has an IT segment that provides cloud migration, IT development, SAP consulting, and cybersecurity solutions.
Calian Group reported sales of $741 million in the last 12 months, up from $343 million in fiscal 2019 (which ended in September). In this period, its operating income rose to $51.9 million from $21.8 million.
Last year, Calian Group disclosed plans to grow revenue by 50% and double its EBITDA over the next three years.
Calian Group reported record results for Q3, with revenue, gross profit and EBITDA up year over year. While sales rose by 11%, gross profits widened by 21%, and EBITDA grew by 22% year over year in fiscal Q3.
Notably, Calian pays shareholders an annual dividend of $1.12 per share, indicating a forward yield of 2.3%. Priced at 10.5 times forward earnings, CGY stock is quite cheap, given that adjusted earnings are forecast to expand by 16.8% annually in the next five years. Given average price target estimates, the TSX stock trades at a 40% discount to consensus price targets in October 2024.
