A proven strategy for generating outsized gains and delivering market-beating returns is to invest in quality growth stocks. You need to identify a portfolio of companies positioned to grow revenue and earnings steadily, which should translate to an appreciation in share prices over time. In this article, I have identified three growth stocks you can buy and hold forever.
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K-Bro Linen stock
Valued at a market cap of $360 million, K-Bro Linen (TSX: KBL) provides laundry and linen services to healthcare institutions, hotels, and other commercial organizations in Canada and the U.K.
It reported revenue of $374 million in 2024, up 16.4% year over year. Comparatively, adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose by 24.2% year over year to $72.1 million.
K-Bro saw its hospitality segment surge 30.3% while healthcare revenue grew 6.2% compared to 2023. “Our record results are the product of our disciplined proven growth strategy,” said Chief Executive Officer Linda McCurdy, highlighting the company’s ability to offset cost inflation as an essential service provider.
Strategic acquisitions played a key role in K-Bro’s growth trajectory. The acquisition of Shortridge contributed significantly to the U.K. division, where adjusted EBITDA margin improved to 19.8% from 15.7% in 2023.
K-Bro maintains a strong balance sheet with $46.2 million in undrawn credit capacity and a debt-to-EBITDA ratio of 2.2 times, positioning it well for future acquisitions.
Priced at 14.2 times forward earnings, the TSX stock is quite cheap and trades at a 45% discount to consensus price targets. The company also pays shareholders an annual dividend of $1.20 per share, which translates to a yield of 3.5%.
Is the TSX stock a good buy?
Element Fleet Management (TSX: EFN), valued at a market cap of $11.4 billion, is a fleet management company operating in Canada, the U.S., Mexico, Australia, and New Zealand. It offers fleet management services, including vehicle acquisition, financing, program management, and remarketing services to corporate, commercial, government, and public service vehicle fleets.
In 2024, it delivered double-digit growth across all major metrics, with net revenue climbing 13% year over year to $1.12 billion, driven by an 18% surge in services revenue. Adjusted operating income reached $601 million, up 13%, adjusted earnings grew 14% to $1.12 and free cash flow per share increased 11% to $1.38.
Element returned $336 million to shareholders through dividends, share repurchases, and preferred share redemptions while completing strategic initiatives, including acquiring Autofleet and centralizing U.S. and Canada leasing operations in Dublin.
Looking ahead to 2025, the company expects net revenue between $1.16 billion and $1.185 billion and adjusted earnings of $1.20 and $1.25 per share. Management expressed confidence in delivering on guidance despite headwinds from peso depreciation and potential trade disputes, with new digital offerings and an insurance solution set to launch throughout the year.
Priced at 23 times forward earnings, EFN stock trades at a 19% discount to consensus price targets.
An undervalued TSX stock
The final TSX stock on my list is Badger Infrastructure (TSX: BDGI), a mid-cap industrial company. In the fourth quarter of 2024, its revenue rose by 8% year over year, while adjusted EBITDA and earnings growth were much higher, at 28% and 131%, respectively.
For the full year, the hydrovac excavation services provider achieved record revenue of $745 million, a 9% increase from 2023, with adjusted EBITDA margins improving to 23.6% from 22% the previous year.
In 2025, Badger plans to manufacture around 200 new hydrovac trucks, refurbish 50 to 60 units, and retire 90 to 130 older vehicles, growing its fleet by 4-7% with capital expenditures projected between $95 million and $115 million. Priced at 18 times forward earnings, the TSX stock trades at a discount of 25% to consensus price targets in March 2025.
