When it comes to building long-term wealth in the stock market, few strategies are as powerful as finding high-quality growth stocks to buy and hold for years.
What’s crucial to understand, though, is that the highest-quality growth stocks don’t just generate strong returns in good years. They are businesses that consistently grow their revenue and earnings over time, creating a compounding effect that can turn even a modest investment into something significant if you have the patience to hold for the long haul.
In fact, compounding is one of the most important concepts in investing. When a business can reinvest its earnings at high rates of return year after year, the gains start to snowball.
That’s why patience and consistency are so critical for long-term investors. It’s not about finding the company that can post the fastest growth in a single quarter or year; it’s about finding the ones that can sustain robust growth over decades.
The best growth stocks to buy and hold for the long haul combine a strong competitive position with the ability to scale efficiently, allowing them to expand their market share and profitability over time.
And while many growth stocks trade at expensive valuations, occasionally, the market offers opportunities to buy these businesses at fair or even attractive prices.
Right now, one of the best growth stocks to buy on the TSX is goeasy (TSX:GSY), the specialty finance company.
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What makes goeasy such a successful business?
One of the most significant reasons why goeasy is considered one of the best growth stocks to buy and hold long-term is that it operates in an underserved segment of the lending market: non-prime borrowers.
These are consumers who don’t qualify for traditional bank credit, whether due to limited credit history, past issues, or other factors that keep them out of the prime lending pool.
While this segment is inherently riskier, it’s also significantly less competitive. Large banks and traditional financial institutions tend to focus on prime borrowers, leaving the non-prime space to smaller, specialized lenders like goeasy. That lack of direct competition gives goeasy a unique advantage.
Furthermore, the company offers a range of products, including personal loans, auto loans, and point-of-sale financing, and it has steadily expanded its customer base across Canada over the last decade. In addition, its lending model allows for higher interest rates to offset the increased risk of lending to non-prime borrowers.
Of course, higher interest rates only work if the business can keep loan losses under control, and that’s where goeasy truly excels. In fact, for years, goeasy has maintained remarkably stable charge-off rates, even during challenging economic conditions, which is a big reason why goeasy has not only survived but actually continued to grow its business through various economic conditions over the past decade.
Why is goeasy one of the best growth stocks to buy now?
Since goeasy is such a high-quality business, it’s no surprise that it’s been growing rapidly for years now. For example, in just the last five years, through the pandemic, surging inflation, and higher interest rates, goeasy’s revenue has increased at a compound annual growth rate (CAGR) of 20.1%. In addition, its normalized earnings per share (EPS) have increased at a CAGR of 26.4%.
Furthermore, not only does goeasy reinvest that cash in expanding its operations, but it also returns roughly 35% of its earnings to shareholders through its dividend. So, it’s not just a high-quality growth stock; it’s also a high-quality dividend stock to buy as well.
And going forward, goeasy’s normalized earnings per share are expected to increase at a CAGR of 15% over the next two years as well, even amongst all the economic uncertainty these days.
Therefore, with goeasy trading at a forward price-to-earnings (P/E) ratio of just 10.1 times, which is below its five-year average of 10.5 times, and offering a dividend yield of 2.8%, there’s no question that it’s one of the best growth stocks to buy right now.
