The TFSA (Tax-Free Savings Account) is the ideal place to hold stocks with explosive potential. You don’t want to pay any tax on any future capital gain, especially if it is a substantial one. The TFSA protects you from any tax liability, so any investment you hold in the account can compound at the highest possible rate.
If you are looking for some stocks with explosive potential, here are three great picks to buy and hold in a TFSA.
PRL: A fintech stock for a TFSA
Propel Holdings (TSX: PRL) stock is up 95% year to date. Its stock is up 200% in the past 52 weeks! So far, it has had exceptionally explosive growth.
Propel operates a specialized lending platform for non-prime consumers in the United States. It also just started a lending platform in Canada. Since 2019, it has grown revenues by 411%. Earnings per share have increased by 1,037%!
The company can grow so quickly because of its proprietary artificial intelligence loan platform. It uses hundreds of factors to underwrite its loans quickly and accurately. As it scales, it collects even more data that can be used to improve its underwriting.
Despite its incredible growth record, Propel still is projecting +40% growth in 2024. Trading for only 16 times earnings and a 2% dividend yield, this stock could still re-rate higher in a TFSA.
VHI: A small-cap growth stock for a TFSA
Another TFSA stock with explosive upside is VitalHub (TSX: VHI). Like Propel, this is a smaller-cap Canadian stock with a market cap of only $350 million. VitalHub provides planning and operational software solutions for the healthcare industry.
VitalHub enables healthcare providers to save money, manage flow, and improve patient outcomes. With healthcare systems becoming ever more strained, VitalHub can help ease some of these issues.
Over the past three years, revenues have risen by a compound annual growth rate (CAGR) of 50%. Earnings per share have increased by a 26% CAGR. Its stock is up 364% in the past five years.
The company is generating over $2 million of cash per quarter. Recent financings put VitalHub with $33 million of net cash on its balance sheet. It has used cash for smart acquisitions in the past, and that should help fuel strong growth in the coming quarters and years.
SYZ: A software turnaround with better days ahead
Another stock that could be explosive in a TFSA is Sylogist (TSX: SYZ). It only has a market cap of $240 million, so like the other stocks above, it is a small-cap.
Sylogist has some high-quality software assets catered for charities, municipalities, and school systems. These were undermanaged for some time. However, with a new management team, that is all changing. Major investments have been made in sales, marketing, and product mix.
Since 2022, revenues have been growing by a mid-teens rate. It has started to make some major sales that could really begin to propel the business forward.
As it starts to scale, this stock should begin to generate a lot of cash. Its services are very sticky once adopted. Any incremental sales will translate into substantial growth. Sylogist is early in the turnaround strategy, so now is a great time to add it to the TFSA.
