Supported by improving earnings and the recent signalling by the United States Federal Reserve’s Chairman, Jerome Powell, of a possible rate cut next month, the S&P/TSX Composite Index has extended its uptrend, gaining 14.6% so far this year. Meanwhile, the following three Canadian stocks have outperformed the broader equity markets with impressive returns. Despite the substantial increases over the last few months, the rally in these stocks could continue, given their healthy growth prospects and solid underlying businesses.
Shopify
Shopify (TSX:SHOP), which offers infrastructure for small and medium-scale enterprises (SMEs) to do commerce, has delivered an impressive return of 28.5% this year. Its solid second-quarter performance and upbeat third-quarter guidance have supported its stock price growth. Meanwhile, the ongoing trade war has created challenges for SMEs. However, Shopify has developed new features, including product filtering by country, duty calculation, and shipping management, to help SMEs sail through this challenging period.
Further, the company has expanded its payments platform to 16 countries this year, thereby almost doubling the number of countries in which the service is currently available. Further, it continues to invest in artificial intelligence (AI) to develop innovative products that can attract a broader range of businesses and drive its operational efficiency. Considering all these factors, I expect the uptrend in Shopify’s financials to continue. Meanwhile, the company’s management predicts a revenue growth of mid- to high 20s for this year, while its free cash flow margin could come within the mid- to high teens. Additionally, it currently trades at a 9% discount compared to its 52-week high, thereby offering an excellent entry point for investors.
Celestica
Celestica (TSX:CLS) is another Canadian stock that has surged this year, outperforming the broader equity markets with gains of over 97%. Its solid quarterly performances and raising of its 2025 guidance appear to have raised its stock price. In the recently reported second-quarter performance, the company’s top line grew 21% to $2.89 billion amid growth across Connectivity & Cloud Solutions and Advanced Technology Solutions segments. The revenue from Hardware Platform Solutions, part of the ATS segment, grew 82% to $1.2 billion. Along with top-line growth, the expansion of its operating margin from 6.3% to 7.4% led its adjusted earnings per share to grow 54.4% to $1.39.
Moreover, the growing adoption of AI has led hyperscalers to invest in expanding AI-ready data centres, which has raised the demand for Celestica’s products and services. Additionally, the company is expanding its product offerings through new innovative launches, which can strengthen its market share. Also, the company trades at a reasonable next-12-month price-to-sales multiple of 1.7, making it an excellent buy.
Dollarama
Dollarama (TSX:DOL), with impressive returns of over 38% for this year, is my final pick. The discount retailer operates 1,638 stores across Canada. Along with its superior direct-sourcing and buying capabilities, its efficient logistics have allowed the company to offer various consumer products at compelling value, thereby enjoying solid same-store sales even during a challenging macro environment.
Additionally, Dollarama continues to expand its store network and hopes to raise its store count to 2,200 by the end of fiscal 2034. Also, it entered the Australian retail market last month by acquiring The Reject Shop, which operated 390 stores. Moreover, Dollarama owns a 60.1% stake Dollarcity, which operates 644 stores across Latin America. Meanwhile, Dollarcity expects to add over 400 stores over the next six years to raise its store count to 1,050 by fiscal 2031. Also, Dollarama can buy an additional 9.89% stake in Dollarcity by exercising its option by 2027, increasing its stake to 70%. Considering its growth prospects and solid underlying business, I expect the uptrend in Dollarama’s financials to continue.
