TFSA Investors: 3 Canadian Growth Stocks for Your 2020 Portfolio

Absolute Software and two other Canadian growth stocks can crush market returns over the long-term.

| More on:
Paper airplanes flying on blue sky with form of growing graph

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The contribution limit for the Tax-Free Savings Account (TFSA) stands at $6,000 for 2020. As all withdrawals from the TFSA are tax free, it makes sense to allocate high growth investments to this account. Here we look at three such Canadian growth stocks that can crush market returns in 2020 and beyond.

Absolute Software

Absolute Software (TSX:ABT) is a Canadian-based company engaged in the development of endpoint security and data risk management solutions.

It has a SaaS (software-as-a-service) business model and offers solutions such as Absolute DDS (Data and Device Security), enabling customers to secure endpoints, assess risk and respond to these security threats.

The increasing number of cyberattacks will benefit Absolute Software. Analysts expect company sales to rise by 5.8% to $104.68 million in 2019. This growth is expected to accelerate to 7.1% in 2020.

Analysts also expect earnings to increase by 16.7% in 2019 and 14.3% in 2020. Absolute Software is valued at 4 times 2019 sales with a forward price to earnings multiple of 40.4 which might be considered expensive.

However, the company has over 12,000 customers (and growing) around the globe with steady subscription sales. It has also experienced double-digit growth in the enterprise and government business verticals in the most recent quarter. Absolute Software stock has gained 15.4% in the last 12 months.

Savaria Corp.

Savaria Corp. (TSX:SIS) offers a range of stair lifts, platform lifts, residential and commercial elevators. The stock has been a solid wealth creator for investors. Savaria stock has returned 185% in the last five years. However, it has underperformed markets in the last 12-month as shares have slumped 7.2%.

Savaria Corp. has grown earnings by an annual rate of 19% in the last 10 years. Analysts expect company sales to grow 31.2% to $375.17 million in 2019 and 6.2% to $398.45 million in 2020. The growth drivers for Savaria remain intact.

The company is well poised to benefit from Canada’s aging population, increasing demand for products such as stair lifts, wheelchair lifts, and elevators. Savaria acquired Garaventa Accessibility in August 2018 to gain traction in European markets. This acquisition helped Savaria increase European sales by a significant margin.

Savaria Corp stock has a forward price to earnings multiple of 22. Comparatively, the company is expected to increase earnings by 22% in 2019 and 25% in 2020. We can see that Savaria Corp is reasonably valued especially considering an attractive dividend yield of 3.4%.

Score and Gaming

Score and Gaming (TSXV:SCR) is another domestic growth company that is focused on mobile gaming and betting space. SCR’s mobile app is theScore, a multi-sports, news and data platform.

The new betting legislation in the United States will be a key driver for Score and Gaming’s top-line growth. The betting application is up and running in New Jersey and is looking to penetrate other markets south of the border. Score and Gaming recently raised $40 million from Fengate Asset Management to fund growth in the betting business.

Analysts expect company sales to rise by 19.3% in fiscal 2020 and by 64.1% in 2021. SCR has a market cap of $261 million and is valued at 7 times forward sales. The stock has gained 111% in the last 12-months, easily outperforming broader markets.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Savaria. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

More on Tech Stocks

young woman celebrating a victory while working with mobile phone in the office
Tech Stocks

2 Beaten-Down Growth Stocks You’ll Be Happy You Own in 2032

Buying these oversold TSX stocks could make you rich by 2032.

Read more »

shopping online, e-commerce
Tech Stocks

Shopify Stock: Could it Reach $100 in 2022?

Shopify stock (TSX:SHOP)(NYSE:SHOP) has seen a huge uptick in daily trading volume, with shares up 28% in the last month.

Read more »

money cash dividends
Tech Stocks

Got $1,000? Buy These 4 TSX Stocks in Bulk!

These four TSX stocks are rebounding already, and offer a substantial opportunity for long-term Motley Fool investors.

Read more »

A stock price graph showing growth over time
Tech Stocks

3 Cheap Growth Stocks to Buy Right Now

Given their growth prospects and cheaper valuations, these three TSX stocks could deliver superior returns in the long run.

Read more »

Overhead shot of young adults using technology at a table
Tech Stocks

3 Stocks I’m Buying During a Tech Stock Correction

Tech stocks like Constellation Software (TSX:CSU) should be on your radar.

Read more »

financial freedom sign
Tech Stocks

$5,000 Invested in These 3 Stocks Could Make You Rich Over the Next 20 Years

Are you looking for stocks that could carry your portfolio over the next 20 years? Here are three top picks!

Read more »

potted green plant grows up in arrow shape
Tech Stocks

This Growth Stock Rallied 20% Yesterday, But it’s Still Cheap!

This growth stock is a great value. The 20% rally indicates the company has executed well and has potential for…

Read more »

Target. Stand out from the crowd
Tech Stocks

Down 70%, This Could Be the Best Stock-Split Stock in Canada to Buy and Hold Forever

This is arguably be the best stock-split stock to buy right now, as it has the potential to multiply your…

Read more »