Canadian stock market investors focused on wealth growth have plenty of picks to consider on the TSX. However, being successful with a growth-focused strategy doesn’t mean picking any growth stock listed on the TSX. Being selective when looking for businesses with actual upside is crucial.
Not every stock has the ability to generate massive returns. In fact, most don’t offer outsized gains since the stock has already seen much of its growth or it operates in a competitive industry.
That said, companies with the potential to surge have some common characteristics. They might be in industries with plenty of growth, scalable business models, and the ability to perform well as the underlying business grows.
This is the kind of combination of factors that lets a business grow sustainably over time and increase the value it has to offer to shareholders. While the stock of these businesses is more prone to volatility, long-term investors who can find the right gems for the long haul are rewarded with meaningful returns down the line.
Here are three Canadian growth stocks that can be good picks to consider for your portfolio.
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Hammond Power Solutions
Hammond Power Solutions Inc. (TSX:HPS.A) is a $3.9 billion market cap manufacturer of specialized equipment and parts that service the power production industry. Hammond Power makes power-quality systems, dry-type transformers, and magnetic components that help producers provide reliable power distribution.
Hammond Power is slated to leverage the growing Artificial Intelligence (AI) adoption. The hyperscaler data centres critical to AI infrastructure have massive electricity demands. Being the manufacturer of these critical components offers Hammond Power a significant growth opportunity that will take years to fully realize. HPS.A stock could be an excellent investment at current levels.
Aritzia
Aritzia Inc. (TSX:ATZ) is a surprising entry to this list, but the $19.2 billion market-cap company actually fits the bill for growth stocks. Aritzia designs apparel and accessories for a range of exclusive fashion brands under its belt. Operating in Canada and the US, the design house stock has shown that it can grow rapidly.
The premium positioning it enjoys has inspired a loyal customer base for Aritzia, particularly resonating with younger consumers. Despite the harsh overall economic environment, Aritzia stock has seen significant capital appreciation in recent years. As of this writing, it is up by 157% from its 52-week low. With new boutiques opening and its online presence expanding, there is no telling how high the share prices can go.
Propel Holdings
Propel Holdings Inc. (TSX:PRL) is more of a name that might make sense to investors looking for growth stocks. Boasting a $951.4 million market capitalization, it is the smallest of the three stocks I will discuss here. PRL is an online financial technology company offering lending-related services to borrowers, banks, and other institutions.
As of this writing, PRL stock is down by roughly 40% from its January 2025 peak. While this may seem alarming to some investors, it could be the factor that makes it attractive to buy and hold. The underlying business has reported an excellent quarter, and it is expanding to larger markets in the US and UK, giving it the potential to grow its customer base without the need to increase costs like traditional financial institutions do.
Foolish takeaway
The prospect of threefold returns is exciting, but you must remember that a stock should have a compound annual growth rate of 25% to deliver such returns in five years. While it isn’t a guarantee to get such returns with every growth-focused investment, it is possible. To this end, these three TSX stocks might be good picks for your self-directed portfolio.
