The latest Bank of Montreal survey results show that Tax-Free Savings Account (TFSA) values hit an all-time high average balance of $44,987 in 2024. Furthermore, poll respondents plan to contribute $6,499 on average in 2025. The new annual contribution limit for this year is $7,000.
Vitalhub (TSX:VHI) and ADF Group (TSX: DRX) have delivered enormous returns in the last three years. Both companies are smart places to invest your 2025 TFSA contribution limit. This pair of small-cap stocks have visible short- and long-term growth potential.
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Cash generation is the core
Vitalhub operates in the health information services industry. The $655.4 million software company focuses on health and human services providers. Its product suite, including electronic health records, operational intelligence, and workforce automation solutions, aims to simplify user experience and optimize outcomes.
Its (CEO), Dan Matlow, said Vitalhub is continuing its path towards stable revenue and cash flow growth. After three quarters in 2024, revenue rose 23% year over year to $48 million, although net income declined 39% to $2.2 million from a year ago. Besides a 25% increase in annual recurring revenue to $53.5 million versus the third quarter (Q3) of 2024, cash and cash equivalents climbed 173.33% to $81.44 million from a year ago.
Management said the two-pronged growth strategy targets organic growth opportunities within its product suite. An aggressive merger and acquisition plan is also in place. In October 2024, Vitalhub acquired MedCurrent and Strata Health Solutions. The former is an integrator of evidence-based guidelines at the point of care, while the latter builds and deploys software to improve access and navigation to care for customers.
Also, in November last year, Vitalhub completed the implementation of SHREWD. The real-time operational management platform supports and gathers data from all stakeholders, such as hospitals, long-term-care facilities, community & cancer care services, ambulance and paramedic services, and telehealth services. SHREWD users include the Winnipeg Regional Health Authority (WRHA), Shared Health Manitoba, and the National Health Service of England.
Matlow said management is very cost-disciplined and that free cash flow (FCF) is an important metric. “Cash generation is the core of what we do,” he added. Vitalhub is the lone healthcare stock in the 2024 TSX30 List (rank 26), the flagship program of Canada’s top 30 performing companies. At $11.75 per share, the three-year return is +291.67%.
Handles complex mega projects
ADF is a leader in connection design, engineering, fabrication and installation of complex structural metals in North America. The $252.7 million company boasts fabrication expertise and specializes in assembling heavy steel built-ups. It obtains highly technically complex mega projects in the commercial, institutional, industrial and public sectors throughout Canada and the United States.
In the first three quarters of 2024, revenue and net income increased 8.08% and 75.9% year over year to $262.2 million and $47.7 million. The projects in the order backlog totalling $330.3 million will extend until the fiscal year ending January 31, 2026. If you invest today, the industrial stock trades at $8.46 per share and pays a modest 0.42% dividend. The overall return in three years is +385.3%.
Preparation for any eventuality
The significant TFSA balance jump last year indicates Canadians are inclined to save. It should prepare users for financial hardship or recession in 2025 and beyond.
