Canadian growth stocks are backed by companies expanding rapidly with the potential to deliver above-average returns in the long term. For Canadian investors, pairing growth stocks with a Tax-Free Savings Account (TFSA) can be a solid strategy.
The TFSA allows you to invest and generate tax-free capital gains, dividends, or interest income. That means every dollar your investment earns stays in your pocket, significantly boosting your returns, especially in the long term. The tax-free nature of the account helps your investments grow faster, making it one of the most effective ways to build wealth.
With this backdrop, let’s explore two Canadian stocks with strong fundamentals and promising growth prospects that I’d stash in a TFSA for the long haul.
Canadian growth stock #1
Celestica (TSX:CLS) is a top Canadian growth stock to buy and hold in a TFSA. The company offers exposure to the high-growth artificial intelligence (AI) sector. Notably, shares of this Canadian tech company have gained about 120% over the past year and are up about 595% in three years. While Celestica stock has appreciated significantly in value, it has further upside potential owing to the solid growth opportunities led by AI-driven demand.
Increased AI infrastructure spending, especially on data centres, will likely drive demand for Celestica’s hardware solutions and support its revenue growth. Further, its Connectivity & Cloud Solutions division will significantly benefit from AI-led demand for servers and storage. Celestica is also witnessing higher demand for its advanced 400G and 800G switches in the networking space, which will significantly boost its revenue and profitability, driving its stock price.
Thanks to these secular tailwinds and a recovery in the industrial business, Celestica is poised to deliver above-average returns over the next decade.
Canadian growth stock #2
goeasy (TSX:GSY) is another top growth stock to buy and hold for the long term. The subprime lender benefits from high loan demand and solid credit underwriting capabilities. goeasy consistently delivers solid revenue and earnings, which have grown at a high double-digit rate over the past decade. This stellar financial performance has led to significant appreciation in its share price.
The company is still in its early stages of product, geographic, and channel expansion. This means it has significant room for growth. goeasy maintains a strong balance sheet with diversified sources of funding. This results in substantial funding capacity, which will likely drive its consumer loan portfolio. Further, the company’s stable credit performance and operating leverage will likely cushion its bottom line, drive its dividend payments, and support its share price.
In summary, goeasy is poised to capitalize on the large subprime lending market with its product and geographical expansion. Besides offering solid growth, goeasy will likely enhance its shareholder value through higher dividend payments.
goeasy stock also appears attractive on valuation. Shares of this financial services company trade at a forward price-to-earnings ratio of 10, which is compelling considering its high double-digit earnings growth rate and a dividend yield of 2.5%.
