Canadian investors got good news last week when the CRA (Canada Revenue Agency) announced that the TFSA (Tax-Free Savings Account) contribution would increase by $7,000 in 2025.
While the 2025 contribution didn’t increase over 2024’s increase, any increase is good news. In 2025, investors who have been Canadian residents and 18 years (or older) in 2009 will be able to have contributed a grand total of $102,000 to their TFSA.
That’s a substantial chunk of cash that can be invested with zero tax consequences. Nowhere else is this possible except with the TFSA.
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Could the new TFSA contribution be your next step to becoming a millionaire?
Many Canadians have taken advantage of the TFSA’s tax-free benefits. In fact, there are 29 Canadians who have TFSAs that are worth $5 million or more. That’s a potential capital gain of over $4.9 million. You don’t want to pay any tax on a gain like that.
With that kind of gain, every $7,000 increase matters. If you are looking for stocks that could rapidly grow your next contribution, here are two to consider today.
A small-cap tech stock with a strong growth profile
VitalHub (TSX:VHI) is an up-and-coming technology stock Canadians may want to add to their TFSAs. It only has a market cap of $590 million today.
This company provides specialized software solutions for the healthcare industry. These solutions include healthcare flow and optimization, case management, and workplace management.
If you have ever needed to wait for a doctor or go to the hospital, you know that the healthcare industry is incredibly inefficient. VitalHub’s solutions help save costs, streamline processes, and improve patient outcomes. Once a health system adopts its solutions, it is very unlikely they will go back to the old methods.
As a result, VitalHub has high recurring revenues and strong growing margins as it scales. In the past three years, revenues have risen by a 40% compounded annual growth rate (CAGR). EBITDA (earnings before interest, tax, depreciation, and amortization) has risen by a 90% CAGR.
VitalHub stock has risen 175% in 2024. While it is not the cheapest stock today, it still trades at a discount to its larger healthcare software peers. If you want outsized growth in your TFSA, VitalHub is an interesting stock to buy on any dips or near-term weakness.
A higher-risk, higher-reward fintech stock for a TFSA
Propel Holdings (TSX:PRL) is another medium-cap stock that could provide substantial growth for a TFSA. Due to its stock rising 190% in 2024, it has a market cap of $1.3 billion. This company could become much larger if it keeps executing its strategy.
Propel offers small- and medium-sized loans to non-prime consumers in Canada and the United States. A unique differentiator is Propel’s specialized lending platform that utilizes artificial intelligence to evaluate loans quickly. Propel offers its loans through bank partners and online platforms.
It can scale its business quickly and at minimal cost. As it gets larger, margins should continue to rise. For context, net profit margins have risen from 6.6% to over 10% in the past three years. Earnings per share have increased by 426% in that time!
Like VitalHub, Propel’s stock is not exactly cheap. However, if it can maintain its strong +30% growth rate, it is reasonably priced at today’s valuation. Propel is a bit of a riskier investment, but it also could have a substantial upside for a TFSA. Position this stock accordingly.
