Two high-performance areas of the TSX index seem to go hand in hand at the moment: metals and marijuana. While gold may have caught the eye of high-growth traders, lithium’s potential for upside should not be ignored. Therefore, let’s take a look at the data for one big Canadian lithium miner alongside some turbo-charged cannabis stocks.
Lithium Americas (TSX:LAC)(NYSE:LAC)
More shares have been bought than sold by Lithium Americas insiders over the past 12 months, which is always a good sign if investor confidence tends to inform your buying choices. Meanwhile, overvaluation (signified by a P/B of four times book) is offset by a decent 40.9% expected annual growth in earnings over the next one to three years.
A TSX index favourite for the silver stuff, Lithium Americas is down 6.44% in the last five days at the time of writing, creating a slight value opportunity, while a one-year past earnings growth of 20.5% and low debt of 11.5% of net worth team up to present a strong recent track record and sound balance sheet.
Overvalued next to the future cash flow value, and with a P/B of 4.4 times book, this debt-free stock has seen insiders shed more shares than pick them up over the past three months, as they have over the past 12 months; however, with a 122.8% expected annual growth in earnings on the way, newcomers with a taste for growth still have plenty to salivate over with HEXO.
Rising since the tail-end of December, this TSX index weed stock is up 14.3% in the last five days at the time of writing, showing that capital gains traders can still make a few quick bucks. Its data changes fast, as is common with high-performance tickers, so, as always, investors will need to be aware of how much time they’ll have to spend watching their stock.
VIVO Cannabis (TSX:VIVO)
Up 1.02% in the last five days, VIVO Cannabis still looks much like every other weed stock on the TSX index did when they started out, with a hot outlook let down by a so-so track record. This is illustrated by VIVO Cannabis’s negative one- and five-year past earnings-growth rates, while its future performance is indicated by a 101.7% expected annual growth in earnings.
Up 5.5% in the last five days at the time of writing, Aphria has been looking like a frontrunner in the Canadian weed race for some time now. Its track record is exemplary, with a one-year past earnings growth of 251.7% compounding its five-year growth of 89.5%. Low debt at 3.1% of net worth and a current projection of 21.9% in its annual earnings growth makes for two more reasons to get invested.
The bottom line
Two things that make VIVO Cannabis a strong buy for the mid-term capital gains investor would be its low debt at 12.6% of net worth combined with attractive per-asset valuation shown by a P/B of 1.3 times book. While Aphria’s P/E of 33.5 and P/B of 1.9 are higher, the latter is arguably the stronger stock in this space. Meanwhile, Lithium Americas remains one of the best such stocks on the TSX index for upside potential.
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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.