Finding stocks that are undervalued is a difficult task, in any environment. Indeed, given the bull run we’ve seen in equity markets of late, valuations are stretched. Investors have to search harder to find pockets of value in today’s market.
However, there are pockets of value. And on the TSX, there happen to be quite a few. Here are three companies I’d definitely put in the undervalued bucket right now.
Kirkland Lake Gold
Yes, gold has been beaten to a pulp as of late. The price levels of the commodity are still well below all-time highs last year. However, it appears gold is making a comeback of late.
However, there are other reasons I like this stock.
When it comes to fundamentals, there are few gold producers that can compete with this Toronto-based company. Kirkland Lake recently reported year-over-year earnings growth of 38%. Moreover, it recorded 68% year-over-year increase in revenue. It has a valuation multiple of approximately 13-times earnings, which is too cheap for investors to ignore.
Additionally, recent drilling results at Detour Lake have been quite positive. Thus, Kirkland Lake appears to be a no-brainer investment, in my view.
Fortis Inc. (TSX:FTS)(NYSE:FTS) has continued to be one of my top dividend picks for quite some time. This company has provided investors with consistent dividend increases. Scratch that. Fortis is among the best dividend growth stocks on the market today.
Currently, the stock has a dividend yield of a 3.6%. On its face, this dividend yield might not seem overly attractive. However, given the track record of nearly five decades of dividend increases, long-term investors have done quite well holding this stock long-term.
The company’s valuation is similarly attractive in this environment. Trading at roughly 21 times earnings, this is a reasonably valued stock in a market that’s otherwise overpriced.
Now, in terms of valuation, Shopify certainly won’t make most investor’s “undervalued” lists. And for good reason. This stock is still trading at nosebleed valuation levels.
However, I think the recent dip in Shopify stock is an attractive buying opportunity for growth investors. Today, the market is pricing in a deceleration of growth with this stock coming out of the pandemic. The degree to which Shopify’s stock has sold off is the issue at play here, in my view.
For investors seeking growth-at-a-reasonable price (or at least a “more reasonable” price), Shopify fits the bill today. This company is poised for long-term growth, and I think remains one of the best growth options on the TSX today.
Like these top picks? Here are a few more to consider right now:
Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.
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 Chris MacDonald 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 FORTIS INC.