The Tax-Free Savings Account (TFSA) is one of the best, if not the best, vehicles for creating long-term income for investors. You get tax-free withdrawals at any time, with your contribution limits increasing each and every year. So, by the time you reach retirement, you could have a whole host of investments in there that have slowly but surely added up over time.
However, that doesn’t mean you should buy everything and anything. In fact, there are a few stocks, specifically tech stocks, that look great but are still sitting on my watchlist. While I do want to pick these up eventually, it has to be the right time, at the right price. So, let’s take a look.
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CSU
First up is Constellation Software (TSX: CSU). CSU has been a long-time winner, but recently shares have come down from all-time highs. The tech stock provides a durable method of acquiring niche software businesses. It holds high cash conversion, a repeatable acquisition model, and it has proven to produce steady revenue growth.
In fact, most recently, its quarter-over-quarter revenue increased 15% when including acquisitions. What’s more, it now holds $10.7 billion in revenue and strong cash flows. The problem then? All that comes at a price. Right now, its trailing price-to-earnings (P/E) ratio is extremely high at over 100 P/E, as net income has come down. Its forward P/E sits at about 27, with the price-to-sales (P/S) ratio at six. And with a dividend at just 0.13%, it’s not exactly looking too valuable at this moment.
With that rich valuation, investors will want to consider perhaps nibbling away at an investment during dips. The current price reflects a lot of future growth, so if growth slows, the stock could drop. So, while this remains a high-quality, core holding for long-term investors, it’s simply not a bargain … yet.
CLS
Next up, we have tech stock Celestica (TSX: CLS), which has also shown remarkable promise. The company provides electronics manufacturing services and supply-chain solutions, a behind-the-scenes operator that’s now providing huge support to the artificial intelligence (AI) community. This comes from the hardware provided to support data centre infrastructure, building the servers and systems that AI chips run on.
And the tech stock has been doing incredibly well. Its trailing revenue is now at US$10.6 billion, with recent quarterly revenue up 21% year over year and adjusted earnings per share (EPS) improving. In fact, the tech stock increased its 2025 guidance! So, with exposure to growing AI and improving margins, it looks solid, right?
True, but there are some issues. Again, it’s expensive trailing at P/E of 55.7 and forward 38.5. Furthermore, it’s historically a cyclical business tied to demand, tariffs, and capital spending. These can make results swing, so with valuation so high from expected demand, any shifts could bring shares sliding. And with shares already up around 400% in the last year, future growth already looks priced in. Should margins improve, however, this could be a solid long-term buy. Just don’t go chasing big moves.
BB
Then we have BlackBerry (TSX: BB), which looks like a solid tech stock just waiting for the right moment. This tech stock is still going through its transition from smartphone creator to software and safety-critical systems (QNX) operator and secure communication segments. These have all shown growth and strong gross margins, with QNX alone operating at a gross margin of 81% at writing.
However, investors aren’t convinced quite yet. The tech stock has a smaller $3.6 billion market cap, returning a modest $533 million trailing revenue base. Meanwhile, P/S is high at about five, the trailing P/E is substantially high, and the forward P/E is at 44.
What investors will really want to watch is the potential upside if software revenue scales up and annual recurring revenue stabilizes and grows. For now, cash generation is still modest, so it remains a highly volatile tech stock until there’s firmer evidence of sustained profit and cash flow.
Bottom line
If you’re interested in these tech stocks like I am, there are a few things to watch for now. So, I’ll be waiting for the right opportunity for each of these tech stocks.
