The Tax-Free Savings Account (TFSA) is an incredible tool that Canadians have at their disposal to help grow and compound their capital as much as possible. Therefore, because of the significant opportunity it creates, it’s essential to use your TFSA to buy the highest quality stocks possible.
The more your investments gain in value, the more taxes you save by owning these stocks in your TFSA, so it’s essential to ensure you’re buying the best of the best.
On the flip side, it’s also paramount to avoid low-quality or high-risk stocks. Not only could you potentially lose some of your hard-earned capital when you buy these companies, but you could also lose valuable contribution room in your TFSA.
So if you’ve got cash in your TFSA that you’re looking to put to work, here are two of the best stocks with explosive potential to buy now.
A top Canadian financial stock
One of the most impressive growth stocks in Canada in recent years has been goeasy (TSX:GSY), the specialty finance stock.
goeasy has grown its operations at an unbelievable pace and continues to have significant growth potential going forward. And while the stock was much cheaper just a few months ago, it still trades below its all-time high while continuing to set record highs for revenue and profitability, a key reason why it’s one of the best stocks for your TFSA.
In fact, in the last five years, goeasy’s revenue has increased at a compounded annual growth rate (CAGR) of 19.8%. And if you think that’s impressive, over that same stretch, it’s managed to grow its normalized earnings per share (EPS) at a CAGR of 31.9%.
And while the subprime consumer lender still invests most of its cash back into growing the business, it’s also constantly increasing the dividend. In fact, while its normalized EPS has grown at a CAGR of 31.9% over the last five years, GSY’s dividend has increased at a CAGR of 30.4%.
This goes to show what an impressive and, more importantly, consistent growth stock goeasy has been. In fact, for over a decade now, it has grown both its revenue and normalized EPS every single year, despite several different macroeconomic headwinds.
So if you’re looking for a high-quality growth stock to buy in your TFSA and hold for years, goeasy is certainly one of the most explosive stocks on the TSX.
An impressive retail stock to buy in your TFSA
In addition to goeasy, Aritzia (TSX:ATZ) is another impressive growth stock to buy in your TFSA today.
And similar to goeasy, although it’s not as cheap as it was a few months ago, Aritzia is still trading well below its all-time high and at an incredibly cheap valuation, which is why it’s one of the best stocks to buy in your TFSA right now.
Over the past year, the women’s fashion retailer has been impacted by economic headwinds like many of its retail peers. However, as it begins to recover, it has significant growth potential, which is why it’s one of the best stocks to buy right now.
In the five years leading up to 2023 (when it was heavily impacted), Aritzia’s revenue grew at a CAGR of 24.2%. Meanwhile, its normalized EPS grew at a CAGR of 23.4% over that five-year stretch. Those are certainly impressive growth rates, particularly for a retail company.
And although it was temporarily impacted last year, analysts already predict a significant bounce back in profitability for Aritzia going forward.
In fact, with Aritzia’s share price hovering around $36 a share today, it trades at roughly 19.9 times its expected EPS over the next 12 months. That’s significantly cheaper than its five-year average forward price-to-earnings ratio of roughly 36 times.
Therefore, while this high-potential stock still trades cheaply, it’s certainly one of the top picks for your TFSA today.
