Missing a stock’s first great run creates a particular kind of investor regret. Every old price looks obvious in hindsight, every early shareholder appears clairvoyant, and the buy button suddenly feels about five years late.
Shopify (TSX: SHOP) rewarded investors who recognized that its opportunity extended far beyond selling software subscriptions. The company kept adding merchants, payment services, and new ways to earn from every transaction. Its first run came from a business becoming considerably larger than the market initially imagined.
That lesson is more useful than searching for another Shopify-shaped company. I’d look for a repeatable growth engine, a widening addressable market, and evidence that customers are committing money before the corresponding revenue appears.
Source: Getty Images
Build before billing
Infrastructure spending creates that setup. Governments and companies need power networks, data centres, transportation systems, water facilities, and environmental work. These projects can last years, creating demand for engineering and consulting long before anyone cuts a ribbon.
A growing backlog, therefore, represents contracted work that hasn’t yet become revenue, offering visibility that many Canadian growth stocks would happily borrow for the weekend. One company currently has more of it than ever.
The next stock I’d watch
WSP Global (TSX: WSP) provides engineering, design, environmental, and consulting services across transportation, property, energy, water, and mining. It doesn’t build every bridge or power line itself. It gets paid for the specialized thinking required before and during construction.
Second-quarter net revenue increased 22.9% to $4.27 billion, helped by acquisitions and 5% organic growth. More importantly, backlog reached a record $20.1 billion, up 23.2% year over year. That provides future work while public infrastructure, electrification, and data centre investment continue expanding the opportunity.
WSP has also used acquisitions to add expertise and enter new markets. Its purchase of TRC strengthened its U.S. energy and environmental business. That playbook resembles Shopify stock’s expansion in one important way: each new capability gives existing customers another reason to spend through the same platform.
Compounding construction
WSP traded around $44.69 at the end of 2016 and recently at about $187. That works out to roughly 16% annualized price growth. Repeating it would be difficult, but the history shows what steady execution has already accomplished.
The following projection applies that historical rate mechanically. It isn’t a forecast, ignores dividends, and assumes an unusually smooth journey that the stock market has not agreed to provide. Even so, it paints a pretty compelling picture.
| YEAR | SHARE PRICE AT 16% CAGR | VALUE OF 37 SHARES |
|---|---|---|
| Today | $186.86 | $6,913.82 |
| Year 5 | $391.64 | $14,490.50 |
| Year 10 | $820.82 | $30,370.25 |
The price of ambition
Near 27 times trailing earnings, WSP isn’t sitting unnoticed in a bargain bin. Acquisitions can bring debt, integration problems, and overpriced assets. A recession or delayed government spending could also slow project awards, while competition for engineers may pressure margins.
I’d therefore start small instead of treating the historical return as a reservation for future wealth. A $7,000 investment buys 37 full shares for $6,913.82 before fees. Anyone buying stocks in Canada can add after future results confirm that the backlog is becoming profitable revenue.
Bottom line
Investors who missed Shopify stock’s first run haven’t missed every Canadian compounder. WSP already has scale, a repeatable acquisition strategy, and $20.1 billion of contracted work waiting to move through the business.
The next decade won’t look like the last one, and WSP won’t become Shopify stock with a surveying vest. Still, if infrastructure demand keeps widening and management converts that backlog into rising earnings, today’s price could eventually become another number investors wish they had taken more seriously.
