After a stellar 21% return in the Canadian stock market last year, investors may be wondering if the party is over. While it’s true that the stock market can be volatile, and last year’s outperformance may mean this year could underperform, there are still Canadian stocks with significant potential. Let’s dive into two ideas that have room to grow.
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Restaurant Brands International: A fast-food giant with staying power
While inflationary pressures have stretched budgets for many Canadians, dining out remains an essential part of everyday life. Enter Restaurant Brands International (TSX: QSR), the parent company behind familiar fast-food names like Tim Hortons, Burger King, and Popeyes. As costs rise for groceries and restaurants, these affordable dining options have continued to attract customers.
In 2024, Restaurant Brands International reported solid financial results. With more than 32,000 restaurants globally, the company saw system-wide sales reach approximately US$44 billion. Its revenue surged nearly 20% to US$8.4 billion, while operating income grew by 18% to US$2.4 billion. Adjusted EBITDA (a key cash flow metric) rose 9%, and adjusted earnings per share climbed 3.1%.
On top of its solid financials, Restaurant Brands International also rewarded shareholders with a 6.9% dividend hike, raising its quarterly payout to US$0.62 per share — an annualized payout of US$3.34 and a yield of nearly 3.8% based on the recent quotation. Despite a down year for the stock in 2024, QSR remains attractively priced at $93.93 per share, with analysts suggesting potential upside of nearly 19% over the next 12 months. Investors seeking a reliable stock with room for growth should look into QSR as a strong candidate.
Constellation Software: A decade of dominance and room to grow
If you’re looking for a stock that has consistently outperformed, Constellation Software (TSX: CSU) should be on your radar. Last year, it delivered an impressive 35% return, adding to its remarkable 29% compound annual growth rate (CAGR) over the past decade. This is a company that knows how to generate wealth for shareholders.
Constellation Software focuses on acquiring and managing vertical market software businesses — companies that provide essential, mission-critical software solutions to niche industries. This targeted approach has helped Constellation grow its revenue and cash flow over time, making it one of Canada’s most successful tech stocks.
While CSU may appear pricey at $4,877 per share, its strong track record justifies the premium. With a forward price-to-earnings (P/E) ratio of around 35 for expected double-digit growth, the stock is seen as fairly valued by analysts. For long-term investors, the tech stock offers plenty of upside, particularly if you’re able to buy on a market dip. This stock has proven its ability to deliver consistent results, and its growth story appears to be set to continue.
The Foolish investor takeaway
While last year’s market rally may not be repeatable in the short term, certain Canadian stocks — like Restaurant Brands International and Constellation Software — continue to offer growth potential. Whether you’re looking for a reliable dividend stock or a growth powerhouse, these companies are poised to keep delivering results for the savvy investor. Keep an eye on them in 2025 and beyond.
