The Canadian government introduced the TFSA (Tax-Free Savings Account) in 2009 to encourage citizens to save more. It allows investors to earn tax-free returns on a specified amount called contribution room. For this year, the contribution room is at $6,500. If you have not maxed out your limit, here are three undervalued growth stocks to buy through your TFSA to earn multi-fold returns.
goeasy
goeasy (TSX: GSY) has been delivering consistently over the last 20 years, with its topline and adjusted EPS (earnings per share) growing in double digits. Supported by these impressive results, the company has returned over 3700% in 20 years at a CAGR (compound annual growth rate) of 20%. Despite the strong growth over these years, the subprime lender has acquired a small percentage of its addressable market. So, it has substantial scope for expansion.
Meanwhile, the company focuses on developing a broad range of products, strengthening its channels and points of distribution, expanding geographically, and improving the customer’s financial wellness to drive sales. Besides, the company has enhanced its underwriting and income verification processes, adopted next-generation credit models, and tightened credit tolerance to lower default rates.
Amid these initiatives, the company’s management expects its loan portfolio to grow 48.7% from its current levels to reach $5.1 billion by 2025. Also, its topline could grow at an annualized rate of 18.5% while improving its operating margin to over 36%. Despite its healthy growth prospects, the company trades at attractive NTM (next 12 months) price-to-sales and NTM price-to-earnings multiples of 1.8 and 9.4, respectively. Besides, it has increased its dividend at a CAGR of over 30% for the last nine years. Considering all these factors, I believe goeasy is an excellent buy.
Lightspeed Commerce
Another undervalued stock I am bullish on is Lightspeed Commerce (TSX: LSPD), which is trading over 86% lower than its September 2021 highs. Last month, the company reported an impressive second-quarter performance for fiscal 2024, with its revenue growing by 25%. Besides, its net losses declined from $79.9 million to $42.5 million while reporting a positive adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for the first time.
The commerce solution provider focuses on developing innovative products and has recently launched several new products for restaurant and retail businesses. It is also expanding its payment platform to new geographical areas, which could continue to drive its ARPU (average revenue per user) in the coming quarter. Further, the company’s customer base is shifting to higher GTV (gross transaction value) customer locations, which is encouraging. Considering its growth prospects and an attractive price-to-book multiple of 1.1, I believe Lightspeed Commerce would deliver superior returns in the long run.
WELL Health Technologies
WELL Health Technologies (TSX: WELL) would be my final pick. The increasing adoption of telehealthcare services and digitizing of clinical practices are driving the demand for the company’s services. It had approximately 1.5 million patient interactions during the recently reported third-quarter earnings. Meanwhile, its revenue and adjusted EBITDA to shareholders grew by 40.2% and 13.2%, respectively.
Further, the company continues to strengthen its market presence through strategic acquisitions. It recently acquired HEALWELL’s clinical assets in Ontario, Seekintoo, and Proack. Besides, it is making substantial investments in developing AI-powered (artificial intelligence-powered) products that could aid healthcare providers in the early detection of severe health conditions and enhance patient experience. So, the uptrend in the company’s financials could continue.
Meanwhile, its NTM price-to-sales and NTM price-to-earnings multiples stand at 1.1 and 13.9, respectively, which looks cheap for a company with high growth prospects.
