1 Small TSX Stock Under $15 with Incredible Upside

Here’s why Martinrea (TSX:MRE) could be the overlooked value stock every investor has been looking for in the auto sector.

| More on:
A stock price graph showing growth over time

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Martinrea International (TSX:MRE) engages in the production of highly-engineered lightweight structures. Accordingly, investors focused on the automotive sector may want to check out this stock. Similar to its larger peers like Magna, Martinrea is exposed to a number of excellent secular tailwinds.

Accordingly, many look to Martinrea as the baby brother of Magna. Let’s take a look at why this smaller automotive play is intriguing today.

Excellent valuation and fundamentals

One of the attractive things about this stock is its valuation. Martinrea currently trades at less than book value and only 0.3-times sales. It’s dirt cheap compared to its peers in this sector which has become a key growth sector of late.

Additionally, this stock is priced below the $15 mark. For those on a budget, Martinrea is certainly a stock to consider right now.

As with other highly-cyclical plays, Martinrea should outperform come earnings season as we inch toward a strong economic recovery. Martinrea has powered through the lockdown with negligible obstructions and possesses a relatively strong balance sheet. The company’s generating significant free cash flow at present, and is expected to continue doing so as automotive sales continue to rebound in the coming quarters.

I believe Martinrea’s discounted valuation makes this smaller-cap option one of the best in the sector today. For those looking for deep value in the auto manufacturing space, Martinrea is a relatively little-known option with some impressive potential upside.

Martinrea’s operations and management team are extraordinary

Martinrea is a company that’s focused on its quality processes and reputation. The company’s management team has made quality a primary goal. And Martinrea has received various awards, acknowledging its quality in the past.

This strategy has been implemented by what I view as one of the best management teams in the auto manufacturing sector. The company’s a small, but it’s got a world-class management team. This team has stayed laser-focused on its strategic goals, with excellent outcomes over time.

Now, Martinrea’s stock chart looks a little different from Magna’s over the long-term. This is a company with a storied and rocky past.

However, insiders at Martinrea are buying into the company’s strategic vision. This recent insider buying should indicate to investors that Martinrea’s valuation is out of whack with the company’s growth potential. On that point, I think investors need to dive into the numbers to see for themselves how undervalued this stock is today.

Bottom line

I think quality of operations and quality of a company’s management team are more important now than ever.

As demand rebounds coming out of this pandemic, investors will want to own the best-quality names in a given sector. In this regard, I’d expect to see some impressive returns for those buying Martinrea stock today.

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. The Motley Fool recommends Magna Int’l.

More on Investing

A solar cell panel generates power in a country mountain landscape.
Top TSX Stocks

3 TSX Stocks You Can Hold for the Next 3 Decades

While the market faces significant headwinds, it's crucial to ensure that you can commit to the TSX stocks you're holding…

Read more »

energy oil gas
Dividend Stocks

2 High-Yield Energy Stocks to Buy as Recession Approaches

Energy stocks such as TC Energy and Canadian Natural Resources allow investors to generate income even in recessionary times.

Read more »

green power renewable energy
Dividend Stocks

3 Top Dividend Stocks to Drive Your Passive Income

These three high-yielding, safe dividend stocks could boost your passive income.

Read more »

Dial moving from 4G to 5G
Tech Stocks

TFSA Investors: 2 Canadian Stocks With Unbelievable Staying Power 

Amid economic uncertainty, investors look for stocks that can thrive in any crisis and grow long term. Here are two…

Read more »

protect, safe, trust
Dividend Stocks

TFSA Wealth: How to Earn $363 in Monthly Passive Income for Life

Canadian investors can harness the power of the TFSA to generate steady tax-free passive income for decades.

Read more »

Canadian Dollars
Dividend Stocks

TFSA Millionaire: How to Turn $40,000 Into $1.2 Million for Retirement

Here's how TFSA investors are using the power of compounding to buy top Canadian dividend stocks to build retirement wealth.

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Superb Income and Growth Stocks for Every Portfolio

The market is full of superb income and growth stocks, but not all belong in your portfolio. Here are three…

Read more »

stock market
Stocks for Beginners

Worried About Stagflation? 2 Canadian Stocks for All Market Cycles 

Stagflation delays economic recovery. You can keep your portfolio stagflation ready with these Canadian stocks that are suitable for all…

Read more »