There are a myriad of incredible stocks to choose from in the market (and potentially as many traps to be avoided) for the average investor. Indeed, doing one’s homework on which stocks are worthy of an investment today can save a given investor a heck of a lot of strife down the road.
In this piece, I’m going to highlight two top Canadian growth stocks I think have the potential to outperform over the long term – and one I’m skeptical of.
Let’s dive in!
Constellation Software
Constellation Software (TSX:CSU) has continued to be one of my top Canadian growth picks for some time. There’s good reason for this, and the chart below highlights just how powerful the returns this company has provided to investors have been in recent years.
The question, of course, is whether this growth can continue. With a growth-by-acquisition model still in full display, the company does appear to have a reasonably long growth runway ahead. Constellation has continued to acquire small and medium-sized tech companies, rolling them under its umbrella and improving their overall operating metrics over time.
Given the fragmented nature of this sector and Constellation’s deep pockets, I think this is a stock that can continue to climb as investors put more capital to work in the tech sector over time.
Shopify
Another top Canadian growth stock I’ve been bullish on (and directionally correct of late) is Shopify (TSX:SHOP).
Shares of the Canadian e-commerce platform provider have been moving in the right direction of late, and I’d expect this direction of travel to continue for the foreseeable future.
The company’s underlying growth tailwinds remain strong. And while Shopify’s overall growth trajectory has slowed from its pandemic-era levels, this is still a company that should see continued uptake as more firms look to establish their online presences.
For those with a long-term investing time horizon, Shopify stock really hasn’t been this cheap in a long time (outside of when the stock got hammered in 2022).
Bausch Health Companies
Bausch Health Companies (TSX:BHC) is a company I haven’t discussed for some time, but it’s one I think is likely headed in the wrong direction.
The stock chart above really highlights the travails the company has provided investors over time. Shares are down roughly 15% in the second quarter and have declined more than 40% over the past year, as debt concerns continue to hamper the company.
Right now, investors want to own stocks with the highest-quality balance sheets. Unfortunately for Bausch investors, who saw incredible growth many years back during an acquisition-driven frenzy which saw the company surge in value, those days of growth by overpriced acquisition are over.
We’ll see if the company can continue to pay down its debt and eventually produce meaningful cash flows for investors. For now, this is one company I don’t think is worth putting any capital toward until it turns the ship around.
