Canadian equity markets have continued on an uptrend, with the S&P/TSX Composite Index trading 21.9% higher year-to-date. Optimism over Donald Trump’s pro-growth policies has improved investors’ confidence, fueling equity markets. Amid the optimism, here are three stocks you can buy now to earn oversized returns in the long run.
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Shopify
Shopify (TSX:SHOP), which offers essential internet infrastructure for small and medium-scale businesses, posted an impressive third-quarter performance earlier this month. Its top line grew 26.1% to $2.2 billion, marking the sixth consecutive quarter of above 25% revenue growth. A 24% increase in GMV (gross merchandise value), higher subscription revenue amid new customer wins, and increased product prices drove sales.
The company’s operating income has grown 132% to $283 million amid topline growth and a decline in operating expenses primarily due to lower-than-expected marketing expenses. Its operating margin expanded from 7.1% to 13.1%. The company generated around $421 million of free cash flows during the quarter, representing 19% of its revenue, a 300 basis point improvement from the previous year’s quarters.
Meanwhile, I expect Shopify’s financial uptrend to continue. This quarter could be solid for the company due to the key holiday selling period. Besides, the expanding e-commerce market, development of innovative products, and expansion of its Shopify Payments platform could support its long-term growth, thus making it an excellent buy.
Celestica
Celestica (TSX:CLS), which offers supply chain solutions and aids in every stage of product development, would be my second pick. The company reported strong third-quarter performance last month, with its revenue and adjusted EPS (earnings per share) growing by 22% and 60%, respectively. The solid demand from enterprise and communications end markets boosted its financials.
Meanwhile, the rising usage of AI (artificial intelligence) has raised the demand for AI-ready data centers, thus expanding the market for high-bandwidth switches and storage controllers. Given its extensive product line and new launches, Celestica could benefit from the expanding addressable market. Besides, it is also making acquisitions and strategic partnerships, which could support its growth in the coming quarters. Considering all these factors, I believe Celestica would be an attractive buy now.
Dollarama
Dollarama (TSX:DOL) is a discount retailer growing its financials at a healthier rate due to its solid same-store sales and store network expansion. The company has adopted a superior direct sourcing method, eliminating intermediatory expenses and increasing its bargaining power. Besides, its efficient logistics allow the company to offer various consumer products at attractive prices. So, the company witnesses healthy footfalls irrespective of the broader market conditions.
Moreover, Dollarama plans to add 60–70 stores annually while increasing its store count to 2,000 by the end of fiscal 2031. Further, the company owns a 60.1% stake in a Latin American retailer, Dollarcity. It also owns an option to increase the stake in Dollarcity by 10%. Besides, Dollarcity also has a solid expansion plan and hopes to raise its store count to 1,050 from its current 580 stores. Considering these growth prospects, I expect the upward momentum in Dollarama’s stock price to continue.
