3 Undervalued High-Growth Canadian Stocks to Buy for Their Upside

STEP Energy Services Ltd. (TSX:STEP) and two other Canadian stocks are deeply discounted today and have high-growth projections.

| More on:
growing dividends

Undervalued stocks are back in investors’ good books at the moment, with some chatter about high growth. Looking through Canadian stocks that are deeply discounted today, there are a few quality high-growth picks out there for investors seeking upside.

Below are three popular choices from the TSX index that meet both criteria, with up to +50% discounts against future cash flow projections, and annual growth in earnings of 30% and over.

STEP Energy Services (TSX:STEP)

Discounted by over 50% compared to its future cash flow value, STEP Energy Services is a favourite of stock analysts that satisfies both value and high-growth requirements. Further indication of decent valuation are STEP Energy Services’s P/E of 7.7 times earnings, PEG of 0.2 times growth, and P/B of 1.2 times book.

Since STEP Energy Services is looking at a 34.3% expected annual growth in earnings, that low PEG is a clear sign that this stock is indeed undervalued in terms of growth. Looking at past pricing trends, STEP Energy Services has seen two distinct peaks in its price this year, each followed by very distinct troughs. Currently in a dip at $8.54 and falling, growth investors have an opportunity to ride the next climb to +$12.

Parex Resources Inc. (TSX:PXT)

Discounted today by 31% compared to its future cash flow value, Parex Resources is similarly well backed up by multiples, with a P/E of 14.8 times earnings (close to market weight), PEG of 0.4 times growth, and P/B of 2.9 times book. While that P/B denotes overvaluation in terms of assets, a 37.3% expected annual growth in earnings contrasts with a low PEG, indicating great value for growth.

Momentum investors may want to take note of the general upward trend of this stock’s share price over the past year. Having dipped recently, this stock represents a value opportunity that’s just right for energy investors looking beyond its overvalued competitors.

Alacer Gold Corp. (TSX:ASR)

Discounted by 48% compared to its future cash flow value, Alacer Gold has grown in value since last month, with its discount deepening on the recent bearishness in gold investment. A P/E of 11.4 times earnings is a little high for the Canadian mining sector, but it’ still good value compared to the TSX average. A PEG of 0.4 times growth and P/B of 0.8 times book rounds out this stock’s decent valuation.

Growth investors should be pleased by a 30.6% expected annual growth in earnings, an improvement of 4.6% since the last time I visited this stock. An upward trending price over the past year also makes this one for momentum investors.

The bottom line

Growth investors looking for improving stocks that are also deeply discounted have a ready-diversified trio of choices in the above stocks. All three have good annual earnings-growth expectations, and all three are also trading well below their future cash flow values.

A note for risk-averse investors: all three stocks listed here also have low to zero debt: Alacer Gold holds 36.9%, STEP Energy Services holds just 3.2%, and Parex Resources has no debt at all. In short, there is something here for investors looking for well-valued growth stocks in energy, oil and gas services, and precious metals, and a decent miniature growth portfolio all told.

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.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

More on Energy Stocks

Oil pipes in an oil field
Energy Stocks

Got $1,000? 2 Canadian Energy Stocks to Buy and Hold Forever

These high-dividend-paying Canadian energy stocks can make your stock portfolio more stable.

Read more »

oil and gas pipeline
Energy Stocks

3 Reasons to Buy TC Energy Stock Hand Over Fist After its Q4 Earnings Event

These top reasons make TRP stock worth considering after its fourth-quarter earnings event.

Read more »

edit Balloon shaped as a heart
Energy Stocks

Sweet Returns: 2 No-Brainer Oil & Gas E&P Stocks to Buy With $200 Right Now

Two oil & gas E&P stocks are no-brainer buys for their strong fundamentals and high-growth potential.

Read more »

energy industry
Energy Stocks

Better Buy: Suncor Stock vs. Exxon Mobil

Oil giants such as Exxon Mobil and Suncor offer investors a tasty dividend yield today. But which energy stock is…

Read more »

Pipeline
Energy Stocks

Down 3.5%: Is Now the Right Time to Buy Enbridge Stock?

A Canadian energy giant remains a first-choice investment right now, despite the weak start in 2024.

Read more »

Mature financial advisor showing report to young couple for their investment
Energy Stocks

New Study Shows 36% of Couples Hide Spending From Partner, And It’s a Pressure Point

Having the hard talk? It can literally pay to do so. Here's how to stop holding out on your partner…

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

2 Energy Stocks to Buy Hand Over Fist in February

Here are two of the best Canadian energy stocks you can buy in February 2024.

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Energy Stocks

2 Growth Stocks That Could Skyrocket in 2024

Are you looking to add some growth to your investment portfolio this year? Here are two top growth stocks to…

Read more »