The secret of investing success lies in uncovering solid companies that have great track records of cash flow generation and shareholder value creation, and taking advantage of short-term stock price movements in order to adjust positions.
Here are three growth stocks that provide investors with this opportunity.
Waste Connections (TSX:WCN)(NYSE:WCN) stock is down almost 10% since September, as it too fell victim to general market malaise.
But although investors are not willing to pay as high a multiple for it, this stock continues to beat expectations, increase its dividend, and create shareholder value, making it a very attractive stock despite recent weakness.
The company has handily beat EPS expectations in the last few years, and 2018 is no different.
Waste Connections is a free cash flow machine. Revenue increased 6.2% in the latest quarter, the third quarter of 2018, and EBITDA increased 6%, and free cash flow as a percentage of revenue was almost 16%.
Waste Connections remains in good shape to capitalize on the many M&A opportunities that exist, and this, along with pricing strength, will help drive continued growth.
It is a solid, well-run company that is poised to continue to do well, even in a weak economy, due to the defensive nature of its business.
Richelieu Hardware (TSX:RCH)
Richelieu stock has fallen 11% from recent highs, but the growth story is intact.
Richelieu Hardware continues to be a very well run business that generates superior returns and has proven to be a good steward of investors’ capital.
This is evidenced by its consistent strategy of growth through acquisitions, and, organically, that has yielded strong growth, strong returns (return on equity of 16.7% and return on investment of 16.6%), strong cash flow generation, and the maintenance of a strong balance sheet, which has given the company the flexibility needed to thrive in every market environment.
Third-quarter 2017 sales increased 15% (6.9% organic growth and 9.5% from acquisitions), as the company continues its path of consolidating the market and gaining market share in the U.S. and Canada.
CCL Industries (TSX:CCL.B)
CCL Industries may not be what we think of when we think of a growth company. But this $10 billion label and packaging company is just that.
The company has grown from revenue of $1.2 billion in 2009 to revenue of $4.8 billion in 2017 for a compound annual growth rate of 18.8%.
And the corresponding increase in free cash flow has been even more impressive. In 2009, the company generated $52.3 million in free cash flow, and in 2017, it generated $425 million for a compound annual growth rate 30%.
The stock price has weakened recently, seeing an almost 16% fall from highs, in what might very well prove to be an attractive buying opportunity.
The company reported second-quarter revenue growth of 8%, EPS growth of 11%, and a 9% increase in free cash flow in the last 12 months.
Fool contributor Karen Thomas has no position in any of the stocks mentioned. CCL Industries is a recommendation of Stock Advisor Canada.