Long-term investing is an effective wealth-building strategy, as it leverages the power of compounding, navigates short-term market volatility, requires less active portfolio management, and reduces transaction costs. Meanwhile, investors should exercise caution when selecting stocks and invest in quality companies with solid financials and healthy growth prospects. Against this backdrop, let’s look at two Canadian stocks that have the potential to deliver multiple-fold returns over the long term.
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Shopify
Shopify (TSX:SHOP) is a global commerce company that provides essential internet infrastructure to help enterprises start and scale their businesses. It reported an impressive second-quarter performance, with its gross merchandise value (GMV) growing by 30.6% to $87.8 billion. The expansion of its customer base and increased sales among existing customers drove its GMV. Meanwhile, its top line grew 31.1% to $2.7 billion amid 37% and 17% increases in its merchant solutions and subscription solutions segments, respectively.
Additionally, the company’s operating expenses as a percentage of total revenue decreased 160 basis points to 37.7% amid disciplined headcount management and operating leverage resulting from strong topline growth. Supported by topline growth and expansion of operating margins, the company’s net income rose 16.2% to $338 million. Additionally, it generated $422 million of free cash flow, which accounts for 16% of its total revenue and marks its eighth consecutive quarter of a double-digit free cash flow margin.
Moreover, the increasing adoption of the omnichannel selling model has unlocked long-term growth opportunities for Shopify. To capitalize on this demand, the company continues to launch innovative products to meet the evolving needs of its customers. It is also investing in artificial intelligence (AI) to deliver AI-powered solutions that enhance the customer experience, expand its user base, and increase revenue per customer.
Furthermore, the company is expanding its payment offerings geographically and introducing new features that support cross-border transactions, enabling merchants to accept multiple currencies. Considering its long-term growth prospects, I expect the uptrend in Shopify’s stock price to continue, thereby delivering multi-fold returns over the next 10 years.
Dollarama
Another Canadian stock that can deliver superior returns over the long term is Dollarama (TSX:DOL), a discount retailer offering a range of consumer products at attractive prices. The Montreal-based retailer has adopted a superior direct-sourcing business model, thereby eliminating intermediatory expenses and enhancing its bargaining power. Additionally, its efficient logistics have helped reduce its expenses, allowing it to pass on the benefits to its customers. Therefore, the company has been enjoying healthy sales even during a challenging environment.
Moreover, Dollarama has planned to expand its store network to 2,200 by the end of fiscal 2034. With its capital-efficient business model, rapid sales ramp-up, and an average payback period of less than two years, these expansions are well-positioned to drive growth in both revenue and earnings. Additionally, the company has also plans to increase the store count of its recently acquired The Reject Shop from 395 to 700 by the end of fiscal 2034 in Australia.
Additionally, Dollarama holds a 60.1% stake in Dollarcity, which operates 658 discount stores across five Latin American countries. Dollarcity plans to expand its store network to 1,050 by fiscal 2031, while Dollarama retains the option to increase its stake to 70% by fiscal 2027. These initiatives are likely to boost Dollarcity’s contribution to Dollarama’s net income in the coming years. Backed by these growth drivers, I expect Dollarama to sustain its financial momentum and deliver attractive long-term returns.
