The Canadian government introduced TFSA (Tax-Free Savings Account) in 2009 to encourage citizens to save more. Investors can earn tax-free returns on a specified amount called contribution room by investing through TFSAs. For 2024, the CRA (Canadian Revenue Agency) has fixed the contribution room to $7,000, while the cumulative contribution is $95,000.
Growth stocks can grow their financials faster than the industry average, thus delivering superior returns. With an upbeat broader equity market, you can add these two explosive stocks to your TFSA to earn superior returns.
Docebo
Docebo (TSX: DCBO) offers enterprises a customizable end-to-end learning platform that could help them improve their engagement, productivity, and customer connections. The Toronto-based company has been growing its revenue at an impressive rate of 44.5% since 2019. Customer base expansion and an increase in average contract value drove its top line. Over the last four years, the company’s customer base has increased from 1,725 to 3,759, while its average contract value has grown at a CAGR (compound annual growth rate) of 17.2%.
Amid topline growth, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) has improved from a loss of $2.2 million in 2019 to a profit of $16.3 million in 2023. The company generated $20.12 million of free cash flows and ended 2023 with cash and cash equivalents of $71.95 million. Amid these solid financials, the company has returned around 340% over the last four years at an annualized rate of 45%.
Meanwhile, I expect Docebo’s financials to continue growing, as the demand for LMS (learning management system) will only rise amid digitization and an increase in remote working and online shopping. Meanwhile, Docebo is driving innovation by leveraging AI (artificial intelligence) to enhance user experience. It is also investing in sales and marketing initiatives, which could boost its financials in the coming quarters. Many of Docebo’s clients have signed multi-year contracts, delivering stability and visibility on its near-term revenue growth. Considering all these factors, Docebo could deliver superior returns over the next three years, making it an ideal addition to your TFSA.
goeasy
goeasy (TSX: GSY) is another growth stock I would be bullish on, given its consistent performance over the years and healthy growth prospects. Over the last five years, the subprime lender has grown its revenue and adjusted EPS (earnings per share) at a CAGR of 19.8% and 31.9%, respectively. During this period, its loan portfolio has grown at a CAGR of 34.5% to $3.65 billion by the end of 2023. Expanding loan portfolio has lowered the cost of borrowing for its customers, with the weighted average interest rate standing at 30.3% in 2023 compared to 40% in 2019. The company’s net charge-off rate, which states the percentage of loans that the company expects will not return, stood at 8.8%, closer to its lower end of the 8.5% — 10.5% guidance.
Meanwhile, goeasy is developing new products and strengthening its digital infrastructure to drive growth, improve efficiency, and enhance customers’ experience. Meanwhile, the company’s management expects its loan portfolio to reach $6 billion (the midpoint of its guidance) by 2026, representing a 65% increase from its current levels. The loan portfolio expansion could grow its revenue at an annualized rate of 12.9%, while its operating margin could improve from 38.1% in 2023 to 41% in 2026. So, its growth prospects look healthy.
Supported by its solid performance, goeasy has returned over 74% over the last 12 months, outperforming the broader equity markets. Despite the surge, it still trades at a next-12-month price-to-earnings multiple of 9.5. The company has also rewarded its shareholders by growing its dividend for 10 consecutive years, while its forward dividend yield stands at 2.94%.
