Coronavirus jitters, oil price war, and falling bond yields are painting a very grim picture for broader markets and investors. Global equities are facing some of the most turbulent times in years. Even more worrisome is that this week is unlikely to be better.
It is hard to find solace for investors amid these volatile markets. However, the same volatility sometimes brings opportunities that one could be on the hunt for years.
Today we’ll discuss two less-known value stocks in Canada that have become even more attractive amid recent market fall.
Value stocks are known as those trading at significantly cheaper valuations and have significant earnings and sales growth potential.
Lottery and gaming products player Pollard Banknote (TSX:PBL) stock has fallen more than 5% in the last two weeks, which is much better than the biggies on the streets.
The company has reported a solid financial performance in the last few years. Both revenues and earnings approximately doubled in the last three years. However, the stock is currently trading at its late 2017 levels.
Investors looking for some exposure to lottery ticket manufacturing companies should consider Pollard stock, as it will offer diversification benefits. Additionally, its non-cyclical nature of business will probably act as a hedge against an economic downturn.
Pollard Banknote stock looks attractive from the valuation standpoint as well. The stock is trading 20 times its expected earnings for the next 12 months. While some might argue that the valuation multiple is too expensive for a value stock, Pollard is trading at a substantial discount against its historical five-year valuation average.
The company will release its Q4 2019 earnings on March 9. Its earnings miss or beat, and more importantly, management’s guidance for 2020 will likely drive its stock in the short term.
Notably, Pollard Banknote looks fundamentally strong. Once the sentiment in the broader markets improves, the stock could once again begin its upward climb.
Great Canadian Gaming
Great Canadian Gaming Corp (TSX:GC) stock was notably weak and has plummeted around 20% in the last couple of weeks. The stock is currently trading at its April 2018 levels.
Great Canadian is one of the biggest gaming and entertainment companies in Canada. It operates 25 properties that include 16,000 slot machines, 575 table games, and over 500 hotel rooms.
Great Canadian’s bottom line growth slowed down in 2019 after a 90% profit increase in 2018. However, the company acquired several casinos in 2018, which will contribute synergy benefits in the long term. The subdued stock will soon attain a skyward momentum after its profit growth steepens.
That said, the stock is currently trading 14 times its next year’s earnings, a significant discount compared to its five-year valuation average. A notably cheaper valuation and a handsome expected growth make Great Canadian a classic value stock.
As stated, as broader markets calm a little over current uncertainties, Great Canadian stock will also likely soar.
Many would feel that dividend and defensive investing will be a prudent approach to deal with a market downturn. However, picking value stocks in such times would reap significant benefits over the long term.