Investing in stocks does not always require high capital. Even with small but regular investments, one can create significant wealth over the long term. In this article, we will look at three TSX stocks that are trading under $10 but are fundamentally strong and have considerable growth prospects.
Aphria
The cannabis sector was going through a challenging period due to structural issues, such as lower-than-expected demand, a slow rollout of retail stores, and a robust black market. However, the sector got a boost earlier this month with the victory of Joe Biden in the United States presidential elections and the legalization of cannabis in five more U.S. states. Biden’s victory could hasten the cannabis legalization at the federal level.
Aphria (TSX:APHA)(NASDAQ:APHA) is one of few cannabis companies that have reported positive EBITDA for six consecutive quarters. Through its value propositions and product differentiation, the company has been able to expand its market share. It has also announced it has signed an agreement to acquire SweetWater Brewing Company, an American craft beer company, for US$300 million. Through this acquisition, the company could enter the lucrative American market.
Meanwhile, in August, Aphria had signed a two-year supply agreement with Canndoc, a medical cannabis producer in Israel. The company’s Aphria One facility located in Ontario had received EUGMP (European Union Good Manufacturing Practices) certification in January. The accreditation will boost its exports to the European Union.
Despite its healthy growth prospects, the company trades at an attractive forward enterprise value-to-sales multiple of 3.7. So, given its healthy growth prospects, strong balance sheet, and attractive valuation, I expect Aphria to deliver oversized returns in the next three years.
WELL Health Technologies
WELL Health Technologies (TSX:WELL) is one of the top-performing stocks of this year, with close to 350% returns. The increased demand for its telehealth services amid the pandemic and its strong fundamentals drove its stock price. In its recently announced third quarter, WELL Health’s top line grew by 50%, while its gross margin also expanded from 35.2% to 41.2%.
The company has continued its expansion by completing the acquisition of DoctorCare, Easy Allied Health, Insig Corporation, Source 44, and Circle Medical Technologies subsequent to the third quarter. In the third quarter, the company had launched “apps.health,” a marketplace for digital health applications that host 26 applications as of now.
Given the convenience and accessibility, the demand for telehealth services could rise even in the post-pandemic world. So, I believe the acquisition of Circle Medical Technologies could be significant, as it could contribute $10 million in annual revenue. Further, the company has signed letters of intent to acquire 10 more companies. So, given its healthy growth prospects, I expect the rally in WELL Health’s stock price to continue.
B2Gold
The progress in the vaccine development and recovery in the economic activities after the pandemic-infused lockdown have dragged gold prices down. The decline in gold prices has led to corrections in gold mining companies’ stock prices, including B2Gold (TSX:BTO)(NYSE:BTG). Currently, the company trades at a 29% discount from its 52-week high. Its valuation looks attractive, with its forward price-to-earnings and forward enterprise value-to-sales multiples standing at 11.8 and 2.8, respectively.
In its recently announced third quarter, B2Gold’s top line grew over 56%, driven by higher average realized gold prices and increased gold production. Meanwhile, its bottom line increased by 89.5%. Higher sales and a decline in its operating expenses per ounce led to its net margin expansion.
The company announced its first quarterly dividends of $0.01 per share on November 5. The management has stated that it expects to pay dividends from now on. Meanwhile, its dividend yield stands at 0.6%, which is on the lower side.
Given its increased production, higher realization price, falling expenses, and attractive valuation, I am bullish on B2Gold.
