Investors were swimming in a sea of discounts during the market crash in the late winter and early spring. Like the weather, the Canadian markets have heated up significantly since that sharp drop. Monster stocks like Shopify and Kinaxis have doubled and, in the former’s case, tripled their value from their March lows.
Today, I want to look at three stocks that are priced under the $5 mark. Should Canadians look to pour into these cheaper alternatives? Let’s dive in and find out.
Canadians: This stock is near a 52-week low
Supremex is a Quebec-based company that manufactures, markets, and sells envelopes and paper packaging solutions and specialty products in North America. Shares of this small company have dropped 47% in 2020 as of close on July 10. Should Canadians look to buy low?
The company released its first-quarter 2020 results on May 15. Net earnings climbed to $2.6 million, or $0.09 per share, compared to $1.8 million, or $0.06 per share, in the prior year. Adjusted EBITDA rose $1.7 million year over year to $8.2 million. Supremex’s results were powered by a strong performance in Canadian envelope operations as well as the recent acquisition of Royal Envelope in Eastern Canada.
Shares of Supremex last possessed a very favourable price-to-earnings ratio of 4.2 and a price-to-book value of 0.4. Unfortunately, it was forced to suspend its quarterly dividend in response to economic pressures.
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Investors should continue to target healthcare-linked equities
Back in early April, I’d discussed whether cannabis stocks were recession proof. Cannabis sales enjoyed a jump when the COVID-19 lockdowns began across North America. However, momentum has since dissipated. Negativity has abounded in this space, in large part due to the disappointing execution for recreational legalization across Canada.
MediPharm Labs (TSX:LABS) is a producer and seller of pharmaceutical-grade cannabis oil and concentrates for derivative products in Canada and Australia. The stock has plunged 69% in 2020 so far. In Q1 2020, MediPharm saw revenue fall 49.5% year over year to $11.1 million. Meanwhile, its net loss ballooned to $22 million largely due to a $12.8 million write-down of inventory to net realizable value.
Fortunately, MediPharm is an essential business, so its operations were able to continue through the pandemic. The company still possesses a solid balance sheet and revenue had put together nice growth before this crisis. Shares of MediPharm last had an RSI of 34, putting it just outside of technically oversold territory. Canadians may want to consider buying the big dip in this cannabis stock today.
One more nano-cap stock for Canadians to watch this summer
Freshii is a quick-serve restaurant chain that has struggled mightily since its IPO in early 2017. The millennial-led company hoped to cash in on health-conscience customers. However, its aggressive expansion was curbed early on. The stock has dropped 37% in 2020. Freshii has been hit with another brutal roadblock in the form of the COVID-19 pandemic. The comeback was already a tall order. Now, in this crisis, Freshii is just too risky for Canadians to touch.
Which stock should you consider today?
Cannabis stocks have been frustrating, but I like MediPharm as a micro-cap target in this space. Its specialized focus in medical cannabis should provide some relief from the chaos in the recreational market. Moreover, its stock sent off a buy signal after falling into oversold territory last week.
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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 Ambrose O'Callaghan has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. The Motley Fool recommends KINAXIS INC.