The Motley Fool

2 Beaten-Down TSX Stocks That Are Due for a Rally

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One of the most important lessons in courage and standing up to the bullies is that it doesn’t matter how many times you fall down; what matters is that you get up every time. But not everyone has the courage to stand up against a bully. And just like people, not every stock has what it takes to stand up against an antagonistic market (the bully in this context).

But some stocks don’t stay beaten down for long. They turn the tide and reach not just their historical valuations but beyond it. Finding and betting on such stocks can do wonders for your portfolio.

A health and wellness products company

Apollo Healthcare (TSX:AHC) is quite heavily discounted from both a price and a valuation perspective, and the decline started happening way before the 2020 crash. After the crash, the share price saw a massive hike (over 1,900%). It has come down a long way since then, and it’s currently trading at a 52% discount from its yearly high.

The price-to-earnings ratio is at 2.3 and the price-to-book ratio is 1.9 times, making its valuation bargain as well. Its revenue for the first quarter of 2021, while a major step up from its 2020 first quarter, is a massive step down from its previous-quarter revenue. But now that things have “normalized” a bit and the stock is trading at a discount, a relatively healthy second-quarter earnings report might become the catalyst this stock needs for a rally.

A renewable energy company

Many renewable energy stocks, unlike energy stocks, saw a massive hike in valuation after the pandemic. Boralex (TSX:BLX) was one of them, and the stock rose 148% from its crash valuation to its 2021 peak. But even before the pandemic, the stock was rising steadily, and now that it has fallen from its 2021 peak (resulting in a 31% discount), it’s quite near the price point it would have been if the pandemic hadn’t disrupted its growth pattern.

The company has sustained the revenue pattern it has shown historically — i.e., a sizeable spike in the last quarter of the last year as well as the first quarter of this year. EBITDA and gross profit grew quite significantly as well. It’s only a matter of time that this overvalued stock starts to rally and starts moving upward at the same momentum as before the pandemic.

Foolish takeaway

While one is significantly undervalued and the other is quite overvalued, both seem poised for a rally — although the pace of each will be different. But even if they double your capital in a span of a few years instead of months, it’s still a more reliable investment compared to tying your money with high-risk meme stocks or unrewarding “recovery stocks.” And although it’s not significant, Boralex also offers dividends at a yield of 1.74%.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends BORALEX INC.

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