Supported by better-than-expected March job growth numbers in the United States, Canadian equity markets have continued their uptrend, with the S&P/TSX Composite Index hitting a new all-time high on Monday. However, few companies continue to trade at cheaper valuations while offering excellent buying opportunities. Meanwhile, here are four value stocks that can deliver superior returns over the next two years.
Cineplex
Amid the concerns over rising COVID-19 cases, Cineplex (TSX: CGX) has witnessed a pullback in the last few days, with its stock price trading 18.6% lower from its March highs. This correction provides an excellent buying opportunity. The wide-scale distribution of vaccines could prompt governments to lift restrictions, thus boosting Cineplex’s financials.
Further, Cineplex has taken several cost-cutting initiatives, such as reductions in rent payments amid renegotiations and slashing of its headcount, which could lower its losses and cash burn. Further, the company has also strengthened its financial position by raising $250 million through debt facilities. It has also raised around $117 million by reorganizing its SCENE loyalty program and through the sale and leaseback of its headquarter.
With the Canadian government expecting to make the vaccine available to all its citizens by this September, I expect Cineplex’s financials and stock price to improve in the second half of this year.
Aurora Cannabis
The weakness in the cannabis sector amid concerns over high valuation and speculative trading has caused Aurora Cannabis (TSX: ACB)(NYSE:ACB) to lose 52.4% of its stock value from its February highs. Meanwhile, the company’s operating metrics are improving. In its recently reported second quarter, Aurora Cannabis’s top-line increased by 28% year over year, while its adjusted EBITDA losses fell from $53.1 million to $12.1 million.
Further, Aurora Cannabis had $565 million of cash as of February 10. So, the company is well positioned to fund its growth initiatives. The company continues to strengthen its position in the global medical cannabis market. It currently earns revenue from 13 countries. Amid the positive customer response to its CBD brand, Reliva, the company is looking at expanding its availability in the United States. So, given its growth prospects, sectoral tailwind, and improving margins, I expect Aurora Cannabis to deliver superior returns over the next two years.
Air Canada
The pandemic-infused travel restrictions have severely dented the passenger airline industry, including Air Canada (TSX: AC). Amid the ongoing vaccination drive, the company’s stock price has recovered some of its losses. However, it is still down 44% from its 2020 January levels. Despite its near-term challenges, the company could deliver superior returns in the long run.
The expansion of vaccination programs could prompt governments to lift some harsh restrictions, such as mandatory 14-day quarantine for international travelers, thus driving the passenger demand. Further, the bailout for the passenger airline industry could also boost its stock price higher.
Amid the strong performance from its cargo vertical, the company is looking at building a robust and dedicated cargo fleet in the coming years. Further, the pickup in air travel could improve the company’s financials, driving its stock price.
BlackBerry
My final pick would be BlackBerry (TSX: BB)(NYSE: BB), trading at 67.6% lower from its January highs. Its recently announced fourth-quarter sales fell short of expectations. However, the company’s long-term growth prospects look robust. With the rising spending on cybersecurity amid remote working and learning, the demand for the company’s products could rise. BlackBerry’s robust pipeline of products and solid customer base bodes well with its growth prospects.
Further, through its partnerships with Amazon Web Services and Baidu, BlackBerry is well positioned to benefit from the growing demand for autonomous electric vehicles. Meanwhile, its management expects both cybersecurity and BTS verticals to deliver double-digit growth in fiscal 2022.
