TFII:CC - 2 Soaring TSX Stocks Whose Growth Is Just Getting Started
2024-06-21 16:50:00 ET
When it comes to investing and putting your hard-earned money back to work for you, it’s no secret that buying and holding for the long haul is the best strategy. However, while it’s important to own a variety of stocks, such as value and dividend stocks, over the long haul, TSX growth stocks offer some of the best potential thanks to the power of compounding .
Long-term investing is ideal because it helps investors mitigate short-term volatility and the risk that comes with it. It’s much harder to predict where a stock will be trading in six months or a year from now than it is where the stock will be five years from now.
That’s because several factors can influence the price of stocks in the near term, whereas, over the longer term, the best and most resilient companies will find a way to consistently expand their operations and increase shareholder value.
Furthermore, with the power of compounding, TSX growth stocks can grow significantly, helping power your portfolio to new highs.
So, with that in mind, if you’re looking for some of the best TSX growth stocks to buy now and hold for years to come, here are two top picks that are just getting started.
A top TSX growth stock in the financial sector
There’s no question that one of the most impressive TSX growth stocks in recent years has been goeasy ( TSX:GSY ), a specialty financial company specializing in providing loans to customers with lower-quality credit ratings who are typically underserved by traditional banks.
This is a business that’s riskier than a traditional bank’s business, but it also allows goeasy to charge higher interest rates on the loans it provides. This means that as long as goeasy can manage its loan book well and keep delinquencies low, it has the potential to earn significant returns on investment, which is precisely how the company has grown at such an impressive rate over the last decade.
More recently, investors have become concerned about its business, especially in the current economic environment. However, goeasy constantly keeps its charge-off rates within its target range and is consistently growing its profitability, which has resulted in the stock continuing its meteoric rise and showing why it’s one of the best long-term growth stocks to buy on the TSX today.
In fact, in the last five years, including through the pandemic and now the uncertain economic environment, goeasy’s revenue has increased at a compounded annual growth rate (CAGR) of 19.8%. Meanwhile, its normalized earnings per share (EPS) have increased at a CAGR of 31.9% over that stretch.
However, even with this incredible and consistent growth, goeasy still trades at a compelling valuation. Currently, its forward price-to-earnings (P/E) ratio is just 10.5 times. That’s not just cheap for such a high-quality TSX growth stock; it’s also right in line with its five-year average.
So, even though the stock has been soaring as of late, you can still buy it today at a reasonable valuation.
An impressive transportation and logistics company
In addition to goeasy, TFI International ( TSX:TFII ), Canada’s largest trucking company and a leading supply chain solutions provider, is another high-quality TSX growth stock with impressive long-term potential.
In recent years, TFI’s aggressive growth-by-acquisition strategy has paid off as it’s rapidly gained market share across North America and managed to scale its costs, boosting profitability.
In fact, in the last five years, its revenue has increased at a CAGR of 14.1%, while its normalized EPS has outpaced that growth, increasing at a CAGR of 18.1%. This has led to a more than 400% total return for TFI shares over that five-year stretch, demonstrating what a high-quality long-term investment it is.
Plus, going forward, TFI’s growing market share and consistently improving economics, coupled with the fact that the transportation and logistics industry continues to grow and expand, gives TFI significant long-term growth potential.
Furthermore, much like goeasy, it trades at a reasonable valuation today, with a forward P/E ratio of just 18.7 times.
So, if you’re looking for a high-quality, high-potential growth stock on the TSX to buy now and hold for years, TFI is certainly one of the best options Canadian investors have today.
The post 2 Soaring TSX Stocks Whose Growth Is Just Getting Started appeared first on The Motley Fool Canada .
Fool contributor Daniel Da Costa has positions in Goeasy. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .
2024