The benefits offered by the TFSA (Tax-Free Savings Account) make it an ideal account to hold quality growth stocks and benefit from outsized gains over time. As all returns derived from qualified investments held in a TFSA are exempt from Canada Revenue Agency taxes, here are three Canadian stocks to buy and hold right now.
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Docebo stock
Among the fastest-growing Canadian tech stocks, Docebo (TSX: DCBO) should be on your shopping list. Valued at $1.73 billion by market cap, Docebo provides e-learning solutions to enterprises and should outperform the broader markets in the upcoming decade.
Docebo ended the second quarter (Q2) of 2024 with subscription sales of US$49.8 million, up 22% year over year, while total sales stood at US$53.1 million. Its gross profit rose 22% to US$42.8 million, indicating a margin of 80.7%, which is similar to the year-ago period.
Docebo is now positioned to report consistent profits due to an asset-light model and high operating leverage. It reported an adjusted net income of US$7.9 million, or US$0.26 per share, in Q2, compared to earnings of US$4.7 million, or US$0.14 per share, last year.
The company ended Q2 with an annual recurring revenue, or ARR, of US$205.9 million, up 19% year over year. A widening base of recurring sales should help Docebo report consistent revenue across market cycles.
With a free cash flow of US$8.4 million, Docebo now has the flexibility to reinvest in organic growth and target accretive acquisitions.
Kinaxis stock
Kinaxis (TSX: KXS) is a TSX tech stock that offers supply chain-related products and solutions to enterprises. The company went public in June 2014 and has returned over 1,000% to shareholders. Despite its remarkable gains, Kinaxis trades 32.5% below all-time highs, allowing you to buy the dip.
Kinaxis reported revenue of US$118.28 million in Q2, up 12% year over year. The Canadian entity emphasized that its SaaS (software-as-a-service) backlog grew 30% as demand drivers intensified, allowing Kinaxis to invest in strategic go-to-market initiatives. Moreover, its annual recurring revenue rose from US$293 million to US$339 million in the last 12 months.
Analysts tracking KXS stock expect its earnings to expand from $2.18 per share in 2023 to $4.35 per share in 2025. Priced at 35.6 times forward earnings, KXS stock trades at a premium, but it is forecast to expand earnings by more than 60% annually in the next five years.
Tecsys stock
The final TSX stock on the list is Tecsys (TSX: TCS), another company offering advanced supply chain solutions. Valued at $631 million by market cap, TCS stock has returned close to 600% to shareholders in the past decade after adjusting for dividend reinvestments.
According to Tecsys, fiscal 2024 (ended June) was a landmark year for the company as its SaaS sales rose by 39%. The company’s strong financial performance in fiscal 2024 showcases the strength of its business model, as SaaS remaining performance obligations grew by 43%.
TCS stock is quite expensive, priced at 75.6 times forward earnings. However, analysts expect earnings to expand from $0.13 in fiscal 2024 to $0.56 in 2025 and $0.85 in 2026.
