Introduced back in 2009, the Tax-Free Savings Account, or TFSA, is a popular registered account in Canada. The TFSA can be used to hold asset classes such as bonds, equities, and mutual funds. Moreover, it is a tax-sheltered account, and you can withdraw earnings in the form of dividends, capital gains, and interest without paying a single dollar in taxes to the Canada Revenue Agency.
Each year, the TFSA has an annual contribution limit which is $6,500 for 2023. The flexibility and tax-free nature of the account make it ideal for holding quality growth stocks, as you can benefit from exponential gains over time.
Investors can buy a wide range of growth stocks across sectors in March 2023, as a weak macro environment has dragged valuations significantly lower. So, here are two TSX stocks you can add to your TFSA portfolio right now.
Neighbourly Pharmacy stock
Neighbourly Pharmacy (TSX: NBLY) is one of Canada’s fastest-growing networks of community pharmacies. A majority of the pharmacies are located in small and underserved markets. So, the company is subject to lower competition while generating a majority of revenue from prescription sales.
In the last eight years, it has expanded to more than 170 locations in Canada and ended 2022 with 6,500 independently owned pharmacies in the country. Neighbourly Pharmacy has a strong relationship with patients, which creates a barrier of entry for competitors and allows the company to generate stable cash flows.
In the last two years, Neighbourly Pharmacy has acquired 70 pharmacies, and this acquisition-based strategy allowed it to increase sales from $150 million in fiscal 2019 (ended in March) to $671 million in the last 12 months. Analysts expect sales to touch $954 million in fiscal 2024, indicating the company is priced at 1.1 times forward sales.
Analysts also expect adjusted earnings to increase to $0.76 per share in fiscal 2024 compared to a loss of $2.57 per share in 2022. So, NBLY stock is priced at 28 times forward earnings, which is quite cheap given its growth rates.
Right now, NBLY stock is trading at a discount of 40% to consensus price target estimates.
Docebo stock
Another high-flying TSX stock you can buy is Docebo (TSX: DCBO), a company that offers an enterprise-facing e-learning platform. Docebo ended 2022 with 3,394 customers and annual recurring revenue of US$157 million. Subscription sales account for more than 90% of total revenue, allowing Docebo to generate stable cash flows across market cycles. In the last 12 months, recurring revenue soared by 52% year over year.
Several billion-dollar giants use Docebo’s LMS (learning management system) platform, including Amazon Web Services, Thomson Reuters, and HP Inc. It currently generates 76% of sales from North America, providing Docebo with enough room to expand in other international markets.
The company’s average contract value has increased from US$12,000 in 2016 to US$46,000 in 2022. Docebo reported a net dollar retention rate of 109% in 2022, indicating that existing customers increased platform spend by 9% in the last year.
Docebo reported a gross margin of 81%, while its adjusted earnings before interest, taxes, depreciation, and amortization margin stood much lower at 6.2% in 2022. Similar to other tech stocks, Docebo is also reinvesting profits to grow sales at a rapid pace.
