There are a lot of severely undervalued growth names on the TSX to look at as we move into mid-July. So, enough with the intros and let’s just get right to them.
First up, we have Tucows (TSX:TC)(NASDAQ:TCX), an internet services (and telecom) company that found itself in a world of pain since topping out in April, with shares shedding a majority of the quick gains posted between the November-to-April 82% trough-to-peak rally.
When it comes to growth, Tucows is the epitome of stability, with its growthy Ting wireless and fibre internet provider alongside its rock-solid cash cow domain and web hosting businesses. I like to think of Ting as the growth engine and the other internet services businesses as a rock-solid foundation (a digital REIT if you will).
More recently, Tucows stock flopped 13.5% in a single trading session on news that Ting’s pact with T-Mobile had ended, but that a new deal had yet been worked out with Verizon. As a result of the move, management slashed its 2019 EBITDA guidance from $62 million to $52 million.
“Yikes! A $10 million downgrade?” Is what many investors thought as they ditched the stock to the curb on Wednesday. In reality, the move (and downgrade) was shorter-term in nature and presents nothing more than a buying opportunity for those looking to get a good price on one of the most promising mid-cap cash cows on the TSX.
My takeaway? Buy the stock here, and if you already own it, it’s time to buy more.
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The toy industry has been the “throw in the towel” trade of the past year. And Spin Master (TSX:TOY), arguably the growthiest and most innovative up-and-coming player in the space has taken one of the biggest hits to the chin, with shares getting pummelled over 35%.
Today, the stock trades near its 52-week lows, and although a stock at 18.8 times trailing earnings isn’t exactly a value bet, I do believe the name is severely undervalued when you weigh the growth prospects and the medium-term catalysts on the horizon.
Spin Master is still an innovative firm. I like to think of it as a tech company that happens to make toys. So, if you want growth but don’t want to break the bank, Spin Master is the horse to bet on as its stock hovers around its support level.
Restaurant Brands International
Last but not least, we have Restaurant Brands International (TSX:QSR)(NYSE:QSR), the only name on this list that’s close to its all-time high. The company has been firing on all cylinders and is breaking into red-hot growth markets that could provide even more room for the fast-food kingpin to run.
Whether we’re talking about Tim Horton’s entry into the Chinese coffee and café market, Burger King’s embracing of alt-meat with the Impossible Whopper (Tim’s also has those juicy Beyond Meat sausage patties!), or the next big move for Popeye’s Louisiana Kitchen, the growth ceiling is unfathomably high. And it’ll keep getting higher as management has the ability to increase it when it’s time for the next acquisition.
For now, though, there’s a ton of room to run for the existing brands from an expansion standpoint. And as management optimizes comps and expansion efforts, I see this stock skyrocketing much higher, with plenty of dividend growth for those who are in it for the long haul.
Stay hungry. Stay Foolish.
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 Joey Frenette owns shares of RESTAURANT BRANDS INTERNATIONAL INC and Spin Master. Tom Gardner owns shares of Tucows. The Motley Fool owns shares of RESTAURANT BRANDS INTERNATIONAL INC, Spin Master, Tucows, and TUCOWS INC and has the following options: short October 2019 $82 calls on Restaurant Brands International. Spin Master and Tucows are recommendations of Stock Advisor Canada.