In the winter and spring of 2020, Canadian and global stocks were pummeled due to turbulence caused by the COVID-19 pandemic. The global economy is still putting together the pieces, and there is no telling if or when a second wave could deal even more damage. However, this environment has also presented historic opportunities for investors. In this climate, the Tax-Free Savings Account (TFSA) can be huge for the savvy and patient buyer. Today, I want to look at three small-cap stocks that are perfect for a TFSA right now.
TFSA investors: This small-cap stock is still undervalued
Back in early March, investors were just beginning to digest the beginnings of a sharp market correction. At the time, I’d suggested that it was a fantastic time to jump on high-quality stocks that were falling into discount territory. goeasy (TSX:GSY), a Mississauga-based financial services company, was one of the stocks I’d targeted. This is a stock I love for TFSA investors.
Shares of goeasy have dropped 17% in 2020 as of close on July 31. However, the stock is up 27% over the past three months. In Q1 2020, the company saw its loan portfolio increase 33% to $1.17 billion. Meanwhile, revenue climbed 20% to $167 million and diluted earnings per share grew 20% to $1.41. goeasy achieved total same-store revenue growth of 19.6%, and it suffered no reduction to its personnel due to the pandemic.
The stock last had a favourable price-to-earnings ratio of 12. goeasy is a financial services company with huge growth potential in the years ahead. Moreover, it also offers a quarterly dividend of $0.45 per share. This represents a 3.2% yield.
One stock to hold for the future
In early April, I’d discussed why Park Lawn (TSX:PLC) was my favourite stock to scoop up after the market correction. This was is also very attractive for TFSA investors. Shares of Park Lawn have dropped 13% in 2020, but the stock is up 15% in a three-month span.
Park Lawn put together a strong first quarter in the face of the pandemic. Revenue increased to $73 million compared to $50 million in Q1 2019. Meanwhile, adjusted EBITDA climbed to $17 million over $11 million in the prior year. Investors can expect to see the company’s second-quarter 2020 results as markets open on August 14.
Shares of Park Lawn last possessed a solid price-to-book value of 1.3. The company boasts a fantastic balance sheet, and it is one of the strongest players in a fast-growing industry. This is one to stash in your TFSA for years to come.
This small-cap stock is perfect for a growth-oriented TFSA
The final small-cap stock that I want to look at for TFSA investors is Cargojet. This company provides time-sensitive overnight air cargo services in Canada. Its stock has surged 61% in 2020 so far, and its shares are up 83% year over year. Cargojet released its first-quarter 2020 results on May 7.
Total revenues increased 11.4% year over year to $123 million. Moreover, adjusted EBITDA grew 24.5% to $40.2 million. Its domestic overnight business and e-commerce maintained robust growth in the face of the pandemic. Management expects earnings growth to continue at a strong pace as it comes out of this crisis. That puts it ahead of many other companies in this difficult climate.
