Amid the concerns over the third-wave of COVID-19, the Canadian equity markets are down this week, with the S&P/TSX Composite Index falling close to 1% in the first two trading days. However, the long-term growth prospects remain strong amid economic expansion and recovery in demand. So, investors should buy fundamentally strong companies that are available at attractive valuations. Meanwhile, here are the four undervalued stocks you can buy right now to earn superior returns.
Lightspeed POS
Amid the pandemic, more small-scale and medium-scale retailers are adopting omnichannel solutions to sell their products. This shift has created a long-term growth potential for Lightspeed POS (TSX: LSPD)(NYSE: LSPD). Further, the company’s robust pipeline of products and aggressive acquisitions augur well with its growth prospects.
In the last few months, Lightspeed POS has acquired two companies while working on acquiring the third. These acquisitions could strengthen its position as an omnichannel commerce platforms provider and also expand its geographical footprint. Meanwhile, the company has also raised US$676.2 million through a new equity offering, which could support its growth initiatives.
However, amid the recent selloff in high-growth tech stocks, Lightspeed has lost 23.3% of its stock value from its 52-week high. So, given its high-growth prospects, I believe investors should use this correction to accumulate the stock for superior returns.
Suncor Energy
Amid the rising concerns over rising COVID-19 cases and the slow rollout of vaccines in Europe, oil prices have declined over the last few days. Falling oil prices have dragged Suncor Energy’s (TSX: SU)(NYSE: SU) stock price down by 13.2% from its recent highs. The decline in its stock price has lowered its valuation into an attractive territory. Currently, its price-to-book and forward price-to-sales multiples stand at 1.1 and 1.2, respectively.
Despite the near-term weakness, oil prices could remain strong for the rest of the year due to the economic expansion and oil demand recovery. Further, Suncor Energy expects to increase its production and asset utilization while lowering its operating expenses. So, improving operating metrics and higher realization prices could drive Suncor Energy’s financials and stock price.
Enbridge
Amid the expectation of recovery in oil demand, Enbridge’s (TSX: ENB)(NYSE: ENB) stock price has increased by 11.9% this year, comfortably outperforming the broader equity markets. However, the company still trades significantly lower than its pre-pandemic highs, providing an excellent buying opportunity. Its valuation also looks attractive, with its price-to-book and forward price-to-sales multiples standing at 1.7 and 2.1, respectively.
Further, the company is continuing with its $16 billion secured growth projects, which could increase its adjusted EBITDA by $2 billion from 2023. The company’s management expects its DCF per share to grow at a compound annual growth rate (CAGR) of 5-7% over the next two years. The company’s dividend yield also looks attractive at 7.3%. So, given its healthy growth prospects, attractive valuation, and high dividend yield, I am bullish on Enbridge.
Kinross Gold
Amid the expectation of economic recovery, investors shunned gold, a safe haven, to buy other asset classes in search of better returns. This shift has led gold prices to fall, weighing heavily on gold mining companies, such as Kinross Gold (TSX: K)(NYSE: KGC). The company has lost close to 38% of its value from its 52-week high. Amid the fall, the company is trading cheaper than its peers. Its forward price-to-sales currently stands at 1.8, while Barrick Gold and Yamana Gold are trading at 2.8 and 2.3, respectively.
Meanwhile, Kinross Gold could benefit from higher production and lower expenses over the next three years. Further, the rising COVID-19 cases and U.S.-China trade tensions could drive gold prices higher, boosting its margins and stock price. The company also pays quarterly dividends, with its forward dividend yield currently standing at 1.4%.
