The golden rule of investing is to buy low and sell high. Investors need to be on the lookout for stocks that are undervalued and have robust growth metrics in the long term. Here, we look at two stocks that are trading close to their 52-week low and have considerable upside potential. These stocks have solid growth metrics and should outperform broader indices in the near term.
Canada Goose
Shares of Canada’s high-end retail company Canada Goose (TSX: GOOS)(NYSE: GOOS) are trading at $49.65, which is 48% below its 52-week high of $95.58. The stock has fallen 21% since August 14 after the company reported its fiscal first-quarter 2020 (ended in June) results.
While Canada Goose easily beat analyst earnings and revenue estimates in the first quarter, its guidance for the rest of fiscal 2020 remained unchanged. This left investors unimpressed, as the company expects lower sales in the next three quarters.
It might also be the case of a conservative approach from company management, which means that Canada Goose will continue to beat its revenue forecast in the upcoming quarters.
Canada Goose is estimated to grow sales by 26% to $1.05 billion in 2020 and 21.4% to $1.27 billion in 2021. Its earnings per share are estimated to grow by 25.7% in 2020, 24.6% in 2021, and at an annual rate of 20.6% in the next five years. Compare this to its forward P/E multiple of 23, and we can see that the stock is undervalued.
Analysts are optimistic about Canada Goose and have a 12-month average target price of $69, indicating an upside potential of 40% from the current price.
Canopy Growth
Shares of leading cannabis company Canopy Growth (TSE:WEED)(NYSE:CGC) are trading at $31.46, which is 59% below its 52-week high of $76.68. The cannabis stocks including have lost considerable value in the last 12 months.
Shares of Aurora Cannabis, Tilray, Aphria, and HEXO are trading 54%, 91%, 60%, and 53% below their 52-week highs, respectively. Horizons Marijuana Life Sciences Index ETF is also trading 50% below its all-time high.
But the growth story for most cannabis stocks is far from over. Analysts expect Canopy Growth sales to rise by 186% to $646.25 million in fiscal 2020 (year ending in March) and by 89% to $1.22 billion in 2021. Though Canopy Growth is still unprofitable, its earnings are expected to improve going forward.
Analysts estimate the company’s net margin to rise from -17.7% in 2021 to a healthy 15.2% in 2022. Canopy Growth’s former CEO Bruce Linton remains optimistic about the company and bought shares recently, thereby increasing his stake.
Cannabis stocks including Canopy Growth will remain volatile, and investors will experience unpredictability in this segment. There are regulatory concerns to be ironed out, which will also boost investor confidence. Canopy’s roller-coaster movement in its stock price now provides investors with an interesting opportunity.
Analysts have a 12-month average target price of $56.67 for Canopy Growth, indicating an upside potential of 80% from the current price.
