TFSA Investors: 3 Canadian Growth Stocks for Your 2020 Portfolio

Absolute Software and two other Canadian growth stocks can crush market returns over the long-term.

| More on:

The contribution limit for the Tax-Free Savings Account (TFSA) stands at $6,000 for 2020. As all withdrawals from the TFSA are tax free, it makes sense to allocate high growth investments to this account. Here we look at three such Canadian growth stocks that can crush market returns in 2020 and beyond.

Absolute Software

Absolute Software (TSX:ABT) is a Canadian-based company engaged in the development of endpoint security and data risk management solutions.

It has a SaaS (software-as-a-service) business model and offers solutions such as Absolute DDS (Data and Device Security), enabling customers to secure endpoints, assess risk and respond to these security threats.

The increasing number of cyberattacks will benefit Absolute Software. Analysts expect company sales to rise by 5.8% to $104.68 million in 2019. This growth is expected to accelerate to 7.1% in 2020.

Analysts also expect earnings to increase by 16.7% in 2019 and 14.3% in 2020. Absolute Software is valued at 4 times 2019 sales with a forward price to earnings multiple of 40.4 which might be considered expensive.

However, the company has over 12,000 customers (and growing) around the globe with steady subscription sales. It has also experienced double-digit growth in the enterprise and government business verticals in the most recent quarter. Absolute Software stock has gained 15.4% in the last 12 months.

Savaria Corp.

Savaria Corp. (TSX:SIS) offers a range of stair lifts, platform lifts, residential and commercial elevators. The stock has been a solid wealth creator for investors. Savaria stock has returned 185% in the last five years. However, it has underperformed markets in the last 12-month as shares have slumped 7.2%.

Savaria Corp. has grown earnings by an annual rate of 19% in the last 10 years. Analysts expect company sales to grow 31.2% to $375.17 million in 2019 and 6.2% to $398.45 million in 2020. The growth drivers for Savaria remain intact.

The company is well poised to benefit from Canada’s aging population, increasing demand for products such as stair lifts, wheelchair lifts, and elevators. Savaria acquired Garaventa Accessibility in August 2018 to gain traction in European markets. This acquisition helped Savaria increase European sales by a significant margin.

Savaria Corp stock has a forward price to earnings multiple of 22. Comparatively, the company is expected to increase earnings by 22% in 2019 and 25% in 2020. We can see that Savaria Corp is reasonably valued especially considering an attractive dividend yield of 3.4%.

Score and Gaming

Score and Gaming (TSXV:SCR) is another domestic growth company that is focused on mobile gaming and betting space. SCR’s mobile app is theScore, a multi-sports, news and data platform.

The new betting legislation in the United States will be a key driver for Score and Gaming’s top-line growth. The betting application is up and running in New Jersey and is looking to penetrate other markets south of the border. Score and Gaming recently raised $40 million from Fengate Asset Management to fund growth in the betting business.

Analysts expect company sales to rise by 19.3% in fiscal 2020 and by 64.1% in 2021. SCR has a market cap of $261 million and is valued at 7 times forward sales. The stock has gained 111% in the last 12-months, easily outperforming broader markets.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Savaria. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

More on Tech Stocks

nvidia headquarters with nvidia sign in front
Tech Stocks

Nvidia Just Delivered a Beat-and-Raise Quarter. There’s 1 Red Flag Investors Shouldn’t Ignore.

The chipmaker continued to benefit from robust demand for artificial intelligence (AI). But can it last?

Read more »

GettyImages-1473086836
Tech Stocks

Why Super Micro Computer Stock Is Soaring Today

The volatile stock is getting a boost from Nvidia.

Read more »

Snowflake logo in snowflake office on wall_snowflake-1
Tech Stocks

Here’s Why Snowflake Stock Skyrocketed Today

Shares of the data company are up 32% for the day.

Read more »

man touching magnifying glass button on floating search bar internet google search engine
Tech Stocks

Why Alphabet Stock Was Sliding Today

The parent company of Google is facing heat from U.S. regulators.

Read more »

chart reflected in eyeglass lenses
Tech Stocks

Top Canadian AI Stocks to Watch in 2025

Celestica (TSX:CLS) stock and another Canadian AI stock are worth watching closely this holiday season.

Read more »

Nvidia Voyager Headquarters
Tech Stocks

Why Nvidia Stock Rallied (Again) on Tuesday

The chipmaker is expected to report earnings this evening.

Read more »

hand stacking money coins
Tech Stocks

3 Growth Stocks That Are Screaming Buys in November

The market might be soaring, but there are still lots of deals to be had. Here are three discounted stocks…

Read more »

Rocket lift off through the clouds
Tech Stocks

Why I’d Buy Constellation Software Stock, Even at Today’s Prices

Despite trading at a relatively frothy multiple, Constellation Software (TSX:CSU) stock still looks like a buy right now.

Read more »