Investors looking to buy and hold stocks in their TFSA (Tax-Free Savings Account) can consider popular Canadian companies trading at a lower valuation. Value investing remains a popular investment strategy on Bay Street, as it allows investors to derive outsized gains and build long-term wealth.
Moreover, if these stocks are held in a TFSA, any returns in the form of dividends, as well as capital gains, will be sheltered from taxes. Here are three such popular TSX stocks you can stash in a TFSA right now.
One of the cheapest stocks on the TSX, Celestica (TSX:CLS) is priced at 5.4 times forward earnings. Comparatively, analysts expect the company to increase earnings by 25% annually in the next five years.
Valued at a market cap of $1.77 billion, Celestica provides enterprise-focused supply chain solutions. Despite lower enterprise spending in the near term, the company is on track to increase revenue from $9.95 billion in 2022 to $10.7 billion in 2024.
In the last 12 months, sales from its Lifecycle Solutions business accounted for 65% of total revenue, up from 39% in 2017. Celestica emphasized growth in this business allows it to increase diversification and provides exposure to markets with stickier customer relationships, robust growth profiles, and accretive margins.
Due to its compelling valuation, analysts expect CLS stock to surge 36% in the next 12 months.
A small-cap stock that also pays you a dividend, Supremex (TSX:SXP), manufactures and markets envelopes as well as paper packaging solutions and specialty products to resellers, SMEs (small and medium enterprises), government entities, and resellers.
In the first quarter (Q1) of 2023, Supremex increased revenue by 40% year over year to $88.4 million, while net earnings surged 50.7% to $9.5 million. Its EBITDA (earnings before interest, tax, depreciation, and amortization) rose to $18.8 million, indicating a margin of 21.3%, compared to the year-ago margin of 19.1%.
Due to its widening profit margins, Supremex pays shareholders a quarterly dividend of $0.035 per share, translating to a forward yield of 2.3%. Priced at less than five times forward earnings, the TSX stock is trading at a discount of 90% to consensus price target estimates.
The final TSX stock on my list is Sprott (TSX:SII), an asset management company. It has increased sales from $75 million in 2019 to $154 million in 2022. Bay Street forecasts the top line to surge to $221 million in 2023 and $230 million in 2024.
Comparatively adjusted earnings in on track to almost triple from $0.91 per share in 2022 to $2.55 per share in 2024. Priced at 18.7 times forward earnings, Sprott also offers investors a dividend yield of almost 3%.
Despite a weak global environment, the company ended Q1 with $25.4 billion in assets under management (AUM), an increase of 8% year over year. Similar to other asset management companies, Sprott generates revenue from management fees, performance fees, and commissions. Its net fees in Q1 rose 13% to $28.7 million due to higher AUM and inflows in its exchange-listed products as well as private strategy segment.
Down 34% from all-time highs, Sprott stock is trading at a discount of 13% compared to its average price target.