Forget a Market Crash: These 3 Tech Stocks Are Trading at a Discount Right Now

Not all market-beating tech stocks are overvalued today. Here are three tech companies that you can pick up at a serious discount.

| More on:
edit Sale sign, value, discount

Image source: Getty Images

The COVID-19 pandemic led to a market crash that saw the Canadian market lose more than 30% of its value in over a month. That was in early 2020. Since then, vaccines have begun being distributed, but many investors are calling for another crash this year. What gives?

After the Canadian market bottomed out at the end of March, it’s been on an incredible bull run. The S&P/TSX Composite Index is up 60% in fewer than 10 months. 

Considering that prior to the COVID-19 market crash, that index was up less than 50% over the previous five years, a 60% run understandably has some investors preparing for a significant pullback. 

Are we in a tech bubble?

If the entire Canadian market is up 60%, you can imagine how high some of the growth stocks have soared since March. Share prices have sky-rocketed, but so have valuations. 

Those lofty valuations are another reason that investors are calling for a crash. Could we be living in a tech bubble that’s about to burst?

Rather than wait for the tech bubble to burst to pick up shares of top companies at a discount, I’ve covered three market-leading tech stocks that are already on sale.

All three of these tech stocks initially rebounded well from the COVID-19 market crash. The impressive bull runs have eventually run out of steam, but it won’t be long before these stocks are back to trading at all-time highs.   

Kinaxis

Kinaxis (TSX:KXS) is trading 25% below all-time highs that were set in early August of 2020. The tech stock initially went on a 150% bull run that began at the bottom of the COVID-19 market crash. 

The sudden rise in valuation may have caused some investors to take profits and close their positions. For long-term investors that are looking to start a position in Kinaxis, though, now is a perfect opportunity. 

The $5 billion tech company develops cloud-based subscription software for supply-chain operations. The software provides support for the entire operations planning process. Demand and supply planning, inventory management, and order fulfillment, are all areas that Kinaxis software can provide support.

At a forward price-to-earnings ratio above 100, shares are definitely not cheap, even at a 25% discount from all-time highs. Market-beating growth does come at a cost. The tech stock is up 250% over the past five years, so you’ll need to pay up to own shares of Kinaxis. 

Enghouse Systems

Sticking with software stocks, Enghouse Systems (TSX:ENGH) is another company that Canadian investors have the chance to pick up shares at an opportunistic discount. Shares are down just about 20% from all-time highs that were set in July of 2020. 

Enghouse Systems has a rich history of delivering market-beating growth to its shareholders. The stock is up 100% over the past five years and 1,300% over the past decade. 

Growth has certainly slowed, but there’s no reason to believe that the $3 billion tech company won’t continue to outpace the Canadian market over the long term. 

Real Matters

Real Matters (TSX:REAL) is the most beaten-down of the three discounted stocks. The tech company is down almost 50% from all-time highs that were set last August. From the bottom of the COVID-19 market crash, Real Matters shares rallied more than 200% in fewer than five months. 

The low-interest-rate environment has really hurt the major Canadian banks and other financial services stocks. Profits have plummeted, and there’s not much optimism around interest returning to pre-COVID-19 levels any time soon. 

Real Matters is a tech company that provides network management solutions for mortgage lenders and insurance companies. The company helps facilitate the mortgage purchase process by offering appraisals for purchases and refinancing transactions. 

The low interest rates may be hurting the banks, but it’s had the opposite impact for Real Matters. Customers across North America took advantage of the low interest rates to refinance their current mortgagees, which has sent revenue flying for the tech company.

Foolish takeaway

Winners often keep winning, so there’s no reason to shy away from adding or starting a position in a market-leading company that’s richly valued. But those valuations should not be ignored. 

If you’re looking to dial back some of the risk in your portfolio, these are three tech stocks that can help balance out a portfolio, but still manage to deliver market-beating growth.

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 Nicholas Dobroruka has no position in any of the stocks mentioned. The Motley Fool recommends Enghouse Systems Ltd., KINAXIS INC, and Real Matters Inc.

More on Tech Stocks

edit Woman calculating figures next to a laptop
Tech Stocks

How to Buy UiPath Stock in Canada

UiPath is a beaten-down AI stock that trades at a massive discount to its earnings growth. Is the tech stock…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

Is It Still Prudent to Invest in Shopify Stock?

Let's dive into whether Shopify (TSX:SHOP) remains a top TSX stock investors should consider, or if this company may be…

Read more »

edit Businessman using calculator next to laptop
Tech Stocks

Which TSX Stock Is Best to Buy Today? 

The stock market is going green with optimism over hopes of economic recovery. You can benefit from this rally with…

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Tech Stocks

Tech Treasures: 2 Undervalued Software Stocks to Watch

These two software stocks have a bright future, according to analysts, and a bright present for investors getting in on…

Read more »

Growth from coins
Tech Stocks

2 Growth Stocks I’d Buy in July 2024

Here's why quality growth stocks such as Datadog should help you deliver outsized gains in the upcoming decade.

Read more »

consider the options
Tech Stocks

Is it Too Late to Buy Celestica Stock Now?

Celestica (TSX:CLS) stock has seen shares surge by 289% in the last year alone! But is growth over? Or could…

Read more »

woman retiree on computer
Tech Stocks

2 Top TSX Growth Stocks to Buy Today and Hold for 10 Years

Given their long-term growth prospects and discounted valuations, these two growth stocks could deliver multi-fold returns in the long run.

Read more »

hot air balloon in a blue sky
Dividend Stocks

3 Roaring Stocks to Hold for the Next 20 Years

Sure, there are stocks roaring upwards in the last year, but these three can claim doing it for decades.

Read more »