Canadian investors can use the TFSA (Tax-Free Savings Account) to buy and hold growth stocks and benefit from outsized gains over time. The TFSA is a registered account where you can hold qualified investments such as bonds, stocks, and mutual funds. As any returns in the TFSA are sheltered from Canada Revenue Agency taxes, you can hold quality growth stocks in the account and derive market-thumping gains in the upcoming decade.
Here are two top TSX growth stocks I’d stash in a TFSA for the long run.
NFI Group stock
Valued at $2.2 billion by market cap, NFI Group (TSX: NFI) stock trades almost 70% below all-time highs. The company manufactures and sells buses in North America, the U.K., Europe, and Asia Pacific. Given the worldwide transition towards clean energy solutions, NFI should benefit from the rising demand for battery-powered buses.
Moreover, after reporting operating losses in the last two years, NFI is expected to end 2024 with adjusted earnings per share of $0.26. Further, its earnings might expand to $1.26 per share in 2025.
In the second quarter (Q2) of 2024, NFI reported revenue of US$851 million as it delivered 1,246 equivalent units, an increase of 34% year over year. Around 23% of total deliveries were battery and fuel cell electric buses (ZEBs). NFI received new orders amounting to 1,114 electric vehicles (EVs) as it ended the quarter with a backlog of 14,605 EVs valued at US$11.8 billion.
Bay Street expects NFI to increase sales from US$3.65 billion in 2023 to US$4.8 billion in 2024 and US$5.61 billion in 2025. Priced at less than 0.5 times forward sales and 15 times forward earnings, NFI stock is quite cheap and trades at a discount of 12% to consensus price target estimates.
Propel Holdings stock
Another undervalued TSX stock is Propel Holdings (TSX: PRL). Valued at $870 million by market cap, Propel Holdings also pays shareholders an annual dividend of $0.52 per share, indicating a yield of over 2%.
Propel is a fintech company that facilitates access to credit for underserved customers. Its flagship brands include For a Credit, CreditFresh, and MoneyKey, while it also operates a lending-as-a-service product line.
Propel claims its robust artificial intelligence-driven platform evaluates customers comprehensively compared to traditional credit scoring tools. This results in an expanded credit market for Propel that should help it drive revenue and earnings growth in 2024 and beyond.
Despite a tepid lending environment, Propel increased sales by 47% to $96.5 million while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose 73% to $29.5 million. The company’s adjusted net income almost doubled to $15.3 million in the June quarter.
Propel Holdings explained, “This quarter was marked by strong credit performance across the loan portfolio. At the same time, we and our Bank Partners observed very strong demand and originated record Q1 volume, in what is also typically our slowest demand quarter.”
Priced at 12 times forward earnings, Propel Holdings trades at a compelling valuation. Analysts remain bullish as the TSX stock is priced at a 20% discount to consensus price targets in August 2024.
