Would you like the value of your TFSA portfolio to increase fast? The Canadian technology sector, while being much smaller than the U.S. tech sector, has a few high-growth tech companies that deliver high returns. Constellation Software (TSX:CSU), Quarterhill (TSX:QTRH), and Shopify (TSX:SHOP)(NYSE:SHOP) are among the best-performing tech stocks.
Let’s look at each of these companies to see what makes them good buys for your TFSA.
Constellation Software is a diversified software company headquartered in Toronto. It provides customized software and services to a select group of industries in the public and private sectors.
Constellation is a serial acquirer that has made a name for itself by purchasing small vertical market software companies serving niche segments and industries in addition to larger occasional purchases.
On January 16, Constellation was named the top volume acquirer of software companies for 2019. The company made a record number of acquisitions via its subsidiaries.
The stock has been climbing steadily for years, surpassing the $1,000 per share mark in 2018. It is now trading around $1,470. The stock has jumped by about 50% over one year and by 17% since the start of the year.
Revenues and earnings are expected to grow at a rate of around 15% per year for the next few years. The growth-by-acquisition company pays a small dividend that currently yields 0.3%.
Quarterhill focuses on the disciplined acquisition, management, and growth of businesses in dedicated technology areas, including vertical market software and solutions, intelligent industrial systems, and innovation and licensing.
Quarterhill finds acquisition opportunities at reasonable valuations that provide a basis for recurring revenue, predictable cash flow, profitable growth, and dedicated management teams.
Quarterhill is a small player in the Canadian tech sector, with a market capitalization of $240 million. It has high revenue growth and low debt with a three-year revenue CAGR of 12.7% and a debt-to-assets ratio of 3.2%. Earnings are expected to grow at an average annualized rate of 20% in the next five years.
The stock has soared 60% over one year and 20% year to date, but is still very cheap, as its five-year expected PEG ratio is only 0.4.
What’s also interesting about Quarterhill is that it pays a dividend, which is rare among tech companies. The company pays a quarterly dividend of $0.0125 per share that yields 2.5%.
Shopify is the kind of stock that can really give your TFSA a welcomed boost. The stock has a one-year CAGR near 180%, and it has already gained more than 20% year to date.
Shopify sells ready-to-use e-commerce solutions. Revenue growth comes from two main segments: subscription solutions and merchant solutions. Revenue is increasing at a rate of around 40% per year. Earnings are expected to grow by about 60% per year in the next five years.
The Canada-based e-commerce service provider’s success can be attributed to a wide range of tools that make it easy for store owners to run their businesses. Today, many companies are choosing to bypass brick-and-mortar stores at all levels and are increasingly selling products directly to customers online.
According to a recent research article by investment bank R.W. Baird, Shopify will soon surpass eBay to become the second-largest U.S. e-commerce platform behind Amazon in terms of sales volume generated by merchants using Shopify services.
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.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Stephanie Bedard-Chateauneuf has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Amazon, Constellation Software, QUARTERHILL, and Shopify. The Motley Fool recommends eBay and recommends the following options: long January 2021 $18 calls on eBay and short January 2021 $37 calls on eBay.