While the Canadian stock market remains strong, several TSX stocks continue to trade at lower valuations and look promising in the medium to long term. So, if you plan to purchase shares of high-quality Canadian companies at lower prices, consider adding Scotiabank (TSX:BNS)(NYSE:BNS), Loblaw (TSX:L), Kinross Gold (TSX:K)(NYSE:KGC), and Capital Power (TSX:CPX) to your portfolio right now.
Scotiabank is an attractive value bet at the current price levels. Though its stock has gained over 20% on an improving operating environment, I see further upside on the back of expected growth in its loans and deposit volumes and solid credit performance. I believe a steady economic expansion, exposure to the high-growth banking markets, and lower provisions to cushion its top and bottom lines. Furthermore, improving efficiency is likely to drive its earnings and future dividend payments.
Scotiabank trades at a considerable discount to its peers on the valuation front and offers a decent dividend yield. Notably, Scotiabank trades at a price-to-book value (P/B) multiple of 1.5, which is well below Bank of Montreal’s, Toronto-Dominion Bank’s, and Royal Bank of Canada’s P/B multiples of 1.6, 1.8, and 2.1, respectively.
The Canadian food and drug retailer Loblaw continues to trade cheap compared to its peers. It trades at the next 12-month (NTM) price-to-earnings (P/E) multiple of 15.2. In contrast, Metro and Alimentation Couche-Tard trade at forward P/E multiples of 16.7 and 17.4, respectively.
While Loblaw is available at an attractive discount, its addition to your portfolio will likely reduce the downside risk and provide stability. It operates a low-risk business and has consistently delivered solid comparable sales growth. Meanwhile, its connected healthcare offerings, momentum in its online grocery pickup services, home delivery, and attractive rewards program bode well for future growth. I believe its growing e-commerce platform and continued momentum in the base business are likely to drive its market share and support its growth rate.
I am bullish on Kinross Gold stock primarily due to its lower valuation and strong growth prospects. Notably, three of its top-producing mines are operating at lower costs, which could boost its profitability in the coming quarters. Furthermore, its diversified assets, strong pipeline of growth projects, and solid free cash flows could support its future growth and drive its stock higher.
Notably, its valuation is well within reach, as it trades at a forward EV/EBITDA multiple of 4.3, which is well below its peers. It also offers a decent yield of 1.8%. Notably, the stock has lost over 12% this year, providing a solid buying opportunity for investors with a long-term outlook.
Capital Power stock is trading cheap and is a reliable bet for income investors. Its forward EV/EBITDA multiple of 8.6 is well below its peer group average. Notably, Canadian Utilities, Fortis, TransAlta Renewables, and Algonquin Power & Utilities are trading at forward EV/EBITDA multiples of 10.6, 12.2, 13.1 13.8, respectively, making Capital Power attractive on the valuation front.
Shares of the power producer have witnessed strong buying in the recent past and are up about 54% in one year. Its low-risk business, growing asset base, solid renewables portfolio, and long-term contractual agreements position it well to deliver higher returns consistently. Thanks to its strong earnings growth potential and predictable cash flows, Capital Power is likely to continue to boost its shareholders’ returns through higher dividend payments. Currently, Capital Power offers a healthy yield of over 5%.
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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends ALIMENTATION COUCHE-TARD INC. The Motley Fool recommends BANK OF NOVA SCOTIA and FORTIS INC.