The Tax-Free Savings Account (TFSA) is certainly one of the most important investing vehicles for Canadians. This account allows investors to put after-tax income to work for retirement, with all capital gains being able to be pulled out tax-free, when the time comes to take distributions.
That ability to grow one’s wealth over many decades and not have to pay taxes on what can be substantial gains is important. Most financial experts will suggest investors put their higher-growth stock picks in a TFSA, with other registered retirement accounts better suited for more value or dividend-focused investments.
So, without further ado, let’s dive into three of the top Canadian growth stocks I think fit well within a TFSA for those thinking long-term.
Shopify
E-commerce platform provider Shopify (TSX:SHOP) continues to headline my list of top Canadian growth ideas, for good reason.
The company’s recent earnings results paint a very rosy picture for investors considering how quickly Shopify will be able to grow in this uncertain macro environment. Indeed, with trade wars and other geopolitical issues picking up, questions around how robust e-commerce growth would be have increased.
That said, the fact that Shopify reported 32% revenue growth and beat in terms of its consensus EPS target on a year-over-year basis is notable. With a free cash flow margin of 18% (it was 16% prior to this print) and plenty of growth runway ahead, Shopify is a top Canadian growth stock I think is worth buying on this dip.
Boyd Group
One growth stock I haven’t touched on much of late is Boyd Group (TSX:BYD).
Some of this probably has to do with the fact that Boyd stock has lagged many of its peers, and some investors have begun to question whether this autobody and repair giant can return to its prior hyper-growth days.
Via acquiring small and mid-sized (mostly family-run) chains of auto body and repair shops, Boyd has grown into an absolute behemoth in both the Canadian and U.S. markets. As such, with prominent market share has come solid pricing power, which has driven robust margins and EPS growth in recent quarters.
In fact, in Q3, the company saw top-line growth of 5%, but gross profit growth of 6.5%. That’s the kind of trend I like to see, even if these absolute numbers are lower than I’d like. I think growth will pick up in the coming quarters, given the reality that most vehicle owners are seeing their wallets pinched from inflation and may be more amenable to fixing their car than replacing it moving forward.
Constellation Software
Now, for one of my growth picks that’s really underperformed most of its peers in the market this year – Constellation Software (TSX:CSU).
Looking at the chart above, it has been an ugly 12-month period for investors in this once-high-flying Canadian growth stock. In fact, investors can go back all the way to late-2023 to look at the last time shares of CSU stock traded at this level.
There are certainly headwinds that have played into a bearish narrative around this stock. These range from concerns around slowing acquisition growth (in a similar way to Boyd), and concerns around overall ROI and ROE metrics, which have been historically strong.
I think Constellation’s recent results, which showed still-meaningful revenue growth of 16% (driven by 5% organic growth) are solid. I’m not going to sugarcoat it – these weren’t the results the market was clearly hoping for. But I do think that $281 million in quarterly cash flow is significant and enough to fund more deals down the line. For those thinking the same way, CSU stock looks like a buy here.
