Amid ongoing tensions in the Middle East and concerns about the impact of elevated oil and natural gas prices on inflation, investor sentiment has weakened, leading to increased volatility in global equity markets. The Canadian benchmark, the S&P/TSX Composite Index, has also pulled back, declining 7.7% from its recent highs.
However, long-term investors should avoid getting distracted by short-term fluctuations and instead use such pullbacks to accumulate high-quality stocks with strong fundamentals. With that in mind, here are two top-quality stocks that investors can consider buying now to generate superior long-term returns.
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Dollarama
First on my list is Dollarama (TSX: DOL), which has declined about 20% from its 52-week high, creating a potential buying opportunity. The discount retailer recently reported mixed fourth-quarter results, with revenue rising 11.7% to $2.1 billion, driven by contributions from its 402 Australian stores, new store openings in Canada, and same-store sales growth of 1.5%. However, same-store sales came in below analysts’ expectations of 2.6%, which management attributed to unfavourable weather and calendar shifts.
Despite the softer same-store sales, Dollarama’s operating income increased 13.3%, supported by strong top-line growth. However, margin pressures emerged, with operating margins declining from 29.7% in the previous year’s quarter to 27.8% due to lower gross margins and higher SG&A (selling, general, and administrative) expenses. Meanwhile, diluted EPS (earnings per share) rose 2.1% year over year to $1.43, slightly exceeding analysts’ expectations.
Looking ahead, management provided fiscal 2027 guidance, expecting to open 60–70 new stores this year and generate same-store sales growth of 3–4%, slightly below consensus estimates. Additionally, it plans to make capital expenditures of $420–$470 million this fiscal year, up from $252.6 million. Lower same-store sales projections and increased capital expenditure appear to have raised investor concerns, contributing to recent stock weakness.
However, the company’s long-term fundamentals remain strong. Its average ticket size grew 3.1% in the fourth quarter, highlighting resilient consumer demand. Dollarama also plans to expand its Canadian store network from 1,691 locations to 2,200 by fiscal 2034, while growing its Australian footprint to 700 stores.
Further support comes from the growing contributions of its investments in Central American Retail Sourcing (CARS) and Inversiones Comerciales Mexicanas (ICM). Given these multiple growth drivers, the recent pullback presents an attractive entry point for long-term investors seeking sustained returns.
Waste Connections
Second on my list is Waste Connections (TSX: WCN), a waste management company operating in secondary and exclusive markets across the United States and Canada. The stock has been under pressure over the past year, declining by more than 23.5% from its 52-week high due to weaker recycled commodity prices, lower renewable energy credits from landfill-gas sales, lower solid-waste volumes, and delays in reopening its Chiquita Canyon landfill.
Despite these near-term headwinds, the company’s long-term outlook remains strong. Waste Connections continues to expand through both organic growth initiatives and strategic acquisitions. It has recently opened five renewable natural gas (RNG) facilities and plans to bring additional projects online later this year. It is also developing a modern recycling facility, which the company hopes to commission next year. Along with these organic growth initiatives, the company expects to maintain an active acquisition strategy, given its strong balance sheet and solid financial position.
Beyond expansion, the company focuses on improving efficiency and productivity through technology, including AI-driven solutions. Its efforts to enhance employee engagement and safety could further reduce employee voluntary turnover and improve customer retention.
With a solid balance sheet and multiple growth drivers, Waste Connections appears well-positioned for long-term growth. Investors with a three-year or longer horizon could consider accumulating the stock despite near-term volatility.
