Early retirement rarely comes from one lucky bet. It usually comes from owning a few great businesses and giving them years to grow. However, adding a quality growth stock to your equity portfolio can help you accelerate your retirement plan by a few years.
One such stock is VitalHub (TSX: VHI), a Toronto-based health-tech company valued at a market cap of $477 million. In the last five years, the TSX stock has returned 153% to shareholders. However, today it trades 46% below all-time highs.
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Why recurring revenue sets apart top Canadian stocks
VitalHub, founded in 2010, builds software for hospitals, mental health agencies, and community care providers. Its tools cover health records, case management, care coordination, and patient flow.
Part of a recession-resistant sector, VitalHub also benefits from high customer retention rates. Once software runs a hospital’s patient flow, replacing it is costly and risky.
VitalHub now serves customers in Canada, the United Kingdom, the United States, Australia, and beyond. The company ended Q2 with annual recurring revenue (ARR) of $101.5 million. Basically, ARR is the yearly value of the company’s ongoing contracts.
Organic sales grew 10% year over year, while total revenue rose 33% to $31.7 million. Recurring revenue accounted for 77% of total sales. In simple terms, roughly $3 of every $4 VitalHub earns comes back the next year.
Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) grew to $8.2 million, up from $6.3 million a year earlier.
CEO Dan Matlow put that jump in perspective. About six quarters ago, VitalHub produced roughly $5 million in quarterly adjusted EBITDA. Now it’s over $8 million.
Much of that came from two big 2025 acquisitions, Induction and Novari. Both were losing money when VitalHub bought them. Today, both segments are profitable.
Matlow explained why the model gets stronger as it grows.
“Every CAD 1 million of ARR theoretically adds, if we don’t add more costs, adds a point of adjusted EBITDA,” he told analysts.
Put another way, the software is already built. So, each new subscription dollar flows mostly to the bottom line.
A cash pile that could fuel the next leg of growth
VitalHub ended the quarter with $136.5 million in cash and investments, up from $121 million in Q1.
After quarter-end, VitalHub bought Buddy Healthcare, a Finnish patient engagement company. Matlow called it a “digital backdoor” solution. It keeps hospitals in touch with patients after they go home.
With Buddy included, ARR would have been about $106 million as of June 30. VitalHub still has more than $120 million ready for more deals.
Management says it’s eyeing deals “meaningfully larger than Novari.” The board also approved a normal course issuer bid (NCIB), which lets VitalHub buy back its own shares.
Armed with a debt-free balance sheet, VitalHub is a profitable growth stock trading at an attractive valuation.
Analysts tracking the TSX stock forecast free cash flow to expand from $7.9 million in 2025 to $43 million in 2028. If the small-cap stock is priced at 15 times FCF, it could surge 50% within the next 18 months.
Why VitalHub belongs on your list of top Canadian stocks
Early retirement is about owning businesses that are reasonably valued while growing at a steady pace. VitalHub checks many of those boxes. Its revenue is growing, and margins continue to expand.
Of course, one stock isn’t a retirement plan. The real edge comes from building a portfolio of quality businesses and holding them for years.
