The TFSA (Tax-Free Savings Account) is a popular registered account in Canada due to the flexibility it provides to users. In 2023, the cumulative contribution room for the TFSA has increased to $88,000, while the contribution limit for the year is $6,500.
Canadians should aim to maximize their TFSA contributions, as any returns generated in this registered account are exempt from taxes.
The ongoing drawdown in share prices provides investors an opportunity to buy undervalued stocks at a lower multiple and benefit from outsized gains when market sentiment improves. Here are two such TSX growth stocks you can buy and hold in a TFSA right now.
BRP stock
Valued at $7.4 billion by market cap, BRP (TSX:DOO) designs, develops, manufactures, and distributes power sports vehicles and marine products in North America, Europe, Australia, Latin America, and New Zealand. Its portfolio of products includes snowmobiles, on-road and off-road vehicles, marine propulsion systems, and recreational aircraft.
Down 23% from all-time highs, DOO stock has returned over 250% to shareholders in the past 10 years. Despite its market-beating gains, BRP Group trades at a compelling valuation. For instance, Bay Street expects BRP to increase adjusted earnings from $9.92 per share in fiscal 2023 to $13.65 per share in fiscal 2025 (ended in January), indicating a forward earnings multiple of 7.1 times.
Moreover, BRP has performed well amid a challenging macro environment; the company increased revenue by 14% to $2.79 billion and EBITDA (earnings before interest, tax, depreciation, and amortization) by 13% to $473.1 million.
Analysts tracking BRP stock remain bullish and expect shares to rise 40% in the next 12 months. BRP reported operating cash flows of $748.2 million in the fiscal second quarter (Q2) of 2024 and invested $220.4 million in capital expenditures to increase production capacity and modernize its software infrastructure.
BRP also pays shareholders an annual dividend of $0.72 per share, indicating a yield of 0.75%, which is not too high. However, these payouts have risen at an annual rate of 14.5% in the last five years.
TFI International stock
One of the largest companies in Canada, TFI International (TSX:TFII) is valued at a market cap of $14 billion. TFI provides transportation and logistics services in the U.S., Canada, and Mexico. Similar to its peers, TFII is wrestling with a difficult freight market and reduced volumes in recent months, driving share prices lower by 13% from record highs.
In 2023, TFI is forecast to report sales of $10.27 billion, which is 13.7% lower compared to 2022. Its adjusted earnings are estimated to narrow by 18.3% to $8.85 per share this year.
TFII stock has delivered stellar returns to shareholders, rising 806% in the last decade after adjusting for dividends. The TSX stock is currently priced at 18.4 times 2023 earnings, which is not too steep.
TFI stock currently offers shareholders an annual dividend of $1.888 per share, indicating a yield of 1.2%. These payouts have risen by 11.7% annually in the last 14 years, showcasing the resiliency of its cash flows.
Due to its reasonable valuation and stellar earnings growth projections, TFI stock trades at a discount of 10% to consensus price target estimates.
