As 2017 comes to an end, now is a great time to have a look at some undervalued stocks that may be poised to deliver next-level returns in the new year. Over the last few weeks, we’ve seen a rotation from higher-growth stocks into value stocks. This is probably a trend that we’ll continue to see in December and potentially in early 2018.
Here are three solid growth plays trading at a discount that are likely going to make up for lost time in the new year:
Alimentation Couche Tard Inc. (TSX:ATD.B)
Couche Tard is a convenience store consolidator that has seen its stock stagnate over the last two years, which has been disappointing for investors who’ve gotten used to outperformance from the earnings-growth king that has grown its earnings through the roof over the last decade.
More recently, Couche Tard reported a solid fiscal Q2 2018 earnings report, which saw earnings beat the Street consensus by nearly 13%. The beat was in spite of hurricane issues, which caused a great deal of property damage and lost business. CST Brands was a major driver of the earnings growth for the quarter, and the best part is, there are still ample synergies that have yet to be unlocked, which will pave the way for more solid quarters over the next year.
Over the medium term, investors can expect Couche Tard to deliver a ~20-25% EPS growth rate as more synergies are realized from the company’s recent acquisitions.
Sleep Country Canada Holdings Inc. (TSX: ZZZ)
Sleep Country Canada surged as high as ~48% for the year before pulling back by ~25% from peak to trough. The stock is still up ~17% YTD; however, I think the recent dip is a fantastic entry point for investors looking to realize next-level growth from a retailer that will thrive, despite the rise of e-commerce disruptors.
While the downfall of Sears Canada was a long-term positive for Sleep Country, it’ll be a near-term headwind, as consumers gravitate towards the liquidation sales going on at Sears. Accessory sales offer a significant opportunity for Sleep Country to boost its top-line numbers; however, the recent Sears blowout sales will likely continue to be a significant dampener on Sleep Country’s accessory numbers, but this is a temporary weakness, which should make long-term investors hungry to buy on any share price weaknesses.
Roots Corp. (TSX: ROOT)
With Roots shares trading at 15-20% below its IPO price, I think it’s time for many bargain hunters to finally initiate a position. Not only does Roots have the opportunity to expand across various international markets, but there’s a significant opportunity to beef up same-store sales growth (SSSG) as the company invests in renovation and innovation.
Better-looking brick-and-mortar locations, enhanced e-commerce, and new product offerings are three major efforts that’ll drive SSSG over the next year and beyond. This, when combined with international expansion efforts, could cause the stock to surge into the atmosphere in 2018.
The international expansion endeavours won’t be cheap though, and success isn’t guaranteed; however, the opportunity for SSSG improvements and the cheaper-than-IPO valuation are reasons to start doing some buying today before what could be an eventful 2018.
Stay hungry. Stay Foolish.
