Written by Daniel Da Costa at The Motley Fool Canada
As long-term investors, it’s crucial to diversify our operations. However, while you want a good mix of all different types of stocks, companies with significant growth potential are some of the most important you’ll buy. Growth stocks are some of the most popular investments that investors buy for their portfolios due to the significant capital gains potential.
However, many investors make the mistake of buying growth stocks for the short term and hoping for significant gains over that short stretch.
The real power in growth stocks, though, especially the highest quality growth stocks, is the consistent growth they offer year over year. Because with the power of compounding, your gains can snowball substantially and grow your capital considerably for years to come.
So with that in mind, if you’re looking for growth stocks to buy now that you can hold forever, here are four of the best in Canada to consider today.
One of the best growth stocks in Canada to buy and hold long-term
One of the very best growth stocks to buy and hold for the long haul has to be Dollarama (TSX:DOL).
The discount retailer has done an incredible job for years of consistently growing sales by expanding its store count, improving its merchandising, and strategically pricing its products.
And now, with the economic environment worsening, Dollarama is also seeing tailwinds as more consumers look to buy their essential staples at its stores.
So it’s no surprise that over the last 10 years, investors in Dollarama have earned a total return on their investment of 619%.
And given that Dollarama continues to have significant growth potential, and is the best-known discount retailer brand in Canada, it’s easily one of the top growth stocks to buy now.
An impressive long-term growth stock
Another impressive growth stock with a significant track record to buy and hold long-term is Alimentation Couche-Tard (TSX:ATD).
While Dollarama has earned investors a total return of 619% over the last decade, Couche-Tard has been even more impressive, earning investors a 652% return.
This is due to its incredible strategy of growing by acquisition but also focusing on growing organically and building brand loyalty.
In addition, much like Dollarama, many of the goods Couche-Tard sells are defensive and don’t see much impact on demand from changing economic environments.
Therefore, it’s the perfect stock to buy and hold long term, thanks to its defensive qualities and significant growth potential.
One of the best financial stocks on the TSX
While Couche-Tard and Dollarama are both high-quality growth stocks, both trade at a significant growth premium. So for investors looking to buy a growth stock that’s undervalued, goeasy (TSX:GSY) is one of the best to consider.
In the last five years, from 2017 to the end of 2022, goeasy’s revenue increased from just $405 million to more than $1 billion, an increase of 152%. Furthermore, its normalized earnings per share (EPS) increased from $2.97 to $11.55, an increase of 289%.
This shows how impressive a growth stock goeasy is, especially since it continues to keep its charge-offs in line with its targets even as it sees a rapid expansion in its operations.
Therefore, while it trades dirt-cheap at a forward price-to-earnings (P/E) ratio of just 8.5 times, it’s one of the best growth stocks to buy now and hold long-term.
An unbelievably cheap growth stock to buy while it’s undervalued
Another ultra-cheap growth stock just like goeasy that you’ll want to buy now while it offers so much value is Aritzia (TSX:ATZ), the women’s fashion retailer.
Aritzia sells discretionary items and, as a result, has begun to see some headwinds in the current market environment. However, these temporary headwinds have caused the stock to fall more than 50% from its highs, giving investors the opportunity to buy the stock ultra-cheap.
Not only has it more than doubled its sales in the last three years, it’s also increased its EPS from $0.87 in fiscal 2020 to $1.86 in fiscal 2023, an increase of 114%.
Therefore, while it trades at just 22.5 times this year’s expected earnings and 12.9 times next year’s expected earnings, when analysts anticipate it will recover, Aritzia is significantly undervalued and one of the best growth stocks to buy now.
Before you consider Alimentation Couche-Tard, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in August 2023... and Alimentation Couche-Tard wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 26 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks * Returns as of 8/16/23