Supercharge Your TFSA With These 3 TSX Stocks

Holding quality growth stocks in a TFSA such as goeasy, Aritzia and Lightspeed may help you generate outsized gains in 2023 and beyond.

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As the Tax-Free Savings Account (TFSA) is tax-sheltered, it makes sense to buy and hold growth stocks in this popular registered account. The ongoing market downturn offers investors the opportunity to buy quality stocks trading at a discount and benefit from outsized gains over time.

Here are three top TSX growth stocks you can hold in a TFSA right now.

goeasy stock

A company that operates in the financial lending space, goeasy (TSX:GSY) stock has already returned 909% to shareholders in the last 10 years. After adjusting for dividends, total returns have been closer to 1,200% since July 2013. Despite its market-beating gains, GSY stock trades at nine times forward earnings and offers shareholders a tasty dividend yield of 3.2%.

goeasy is among the largest non-prime lenders in Canada and has originated $10.7 billion in loans to date. Its loan originations in the first quarter (Q1) of 2023 increased 29% year over year to $616 million. The loan-loss provision rate also fell to 7.48% in Q1 from 7.62% in Q4 of 2022 due to improved portfolio mix and delinquency performance.

Despite an elevated pricing environment in the last 12 months, goeasy’s focus on prudent expense management allowed the company to reduce its efficiency ratio to 33.1% in Q1 of 2023, compared to 35.7% in the year-ago period. For financial lending companies and banks, the efficiency ratio is measured by dividend non-interest expenses with sales which indicates a lower multiple is desired.

Analysts remain bullish on goeasy stock and expect it to gain over 30% in the next 12 months.

Lightspeed stock

A Canada-based fintech company, Lightspeed Commerce (TSX:LSPD) is valued at a market cap of $3.7 billion. LSPD stock is up 25% in 2023 but 85% below all-time highs.

Lightspeed aims to power businesses by enabling multichannel sales, new location expansions, financial solutions, and global payments. In the last 12 months, Lightspeed has reported revenue of $731 million with a gross transaction volume (GTV) of $87.1 billion. The GTV is the total volume of transactions processed on the Lightspeed platform.

Its sales have risen at a compound annual growth rate of 82% since fiscal 2021, while GTV has increased by 61% annually. At the end of fiscal Q4 of 2023 (ended in March), 95% of sales were subscription-based, which should result in predictable cash flows across business cycles.

Analysts expect Lightspeed to turn profitable in fiscal 2024 and end the year with adjusted earnings of $0.09 per share compared to a loss of $0.22 per share in fiscal 2023.

Aritzia stock

The final stock on my list is Aritzia (TSX:ATZ), which has fallen 43.5% year to date. A vertically integrated luxury design house, Aritzia reported sales of $463 million, an increase of 13% year over year in fiscal Q1 of 2024 (ended in May).

Aritzia is rapidly gaining traction in the U.S. and has nearly doubled its active client base in the last two years. Sales originating from the U.S. rose 22% in fiscal Q1 to $252 million.

But investors were worried about Aritzia’s narrowing profit margins as gross margin declined to 38.9% in Q1, compared to 44.3% in the year-ago period. Its adjusted earnings before interest, tax, depreciation, and amortization also fell 54.6% to $31.6 million in the quarter, resulting in a selloff in share prices.

But ATZ stock is priced at 28 times forward earnings and might report adjusted earnings per share of $1.88 in fiscal 2025, up from $0.97 in fiscal 2024.

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.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Aritzia. The Motley Fool recommends Lightspeed Commerce. The Motley Fool has a disclosure policy.

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