As the Canadian equity market continues to trend higher, it’s wise to invest in fundamentally strong stocks trading at attractive valuations.
With top-quality value stocks in the backdrop, let’s dig into five TSX stocks trading below $100 with solid potential for growth in the medium to long term.
Let’s start with Absolute Software (TSX:ABST)(NASDAQ:ABST) stock. I expect the company to benefit from the increased spending on cybersecurity threats. Meanwhile, its large addressable and high-growth market, lower churn, channel and global expansion, and pipeline of new products position it well to deliver solid revenue and adjusted EBITDA. Also, its strategic acquisitions and cross-selling opportunities augur well for growth.
Despite its strong fundamentals, Absolute Software stock is undervalued. Its NTM (next 12-month) EV/sales multiple of 2.1 is lower than the historical average. Furthermore, Absolute Software stock is also trading cheaper than peers.
Next up is Suncor Energy (TSX:SU)(NYSE:SU) stock, which is trading significantly lower than its historical average. Its NTM EV/EBITDA multiple of four is about 20% lower than the three-year average and well within investors’ reach.
While its stock is trading cheap, the uptrend in crude price and improving energy demand provide a solid growth foundation. Meanwhile, Suncor’s integrated assets, favourable product mix, and focus on lowering breakeven costs bode well for growth. Suncor is reducing debt and continues to enhance investors’ returns through share buybacks and regular dividend payments.
Scotiabank (TSX:BNS)(NYSE:BNS) is another Canadian stock that looks attractive at current levels, despite the sharp recovery in its price. Its P/BV and P/E multiple of 1.4 and 10, respectively, are lower than its peers’ multiples. Meanwhile, improving economic trends, the expected increase in credit demand, and the rise in interest rates suggest that Scotiabank stock has ample room for growth.
Scotiabank’s exposure to the high-quality, high-growth banking markets suggests it is well positioned to capitalize on improving operating environment. Furthermore, its strong credit quality, solid balance sheet, improved efficiency, and lower provisions will likely drive its profitability. Scotiabank also has a rich history of dividend payments, implying investors could continue to benefit from higher dividend payments.
Kinross Gold (TSX:K)(NYSE:KGC) is too cheap to ignore at current price levels. Its NTM EV/EBITDA multiple of 3.7 compares favourably to its peer group average as well as its historical average. Notably, gold prices have trended lower in the recent past pressurizing shares of gold mining companies, including Kinross Gold. Despite near-term headwinds, I maintain a bullish outlook on Kinross Gold stock.
I expect Kinross Gold to benefit from growing production and cost reduction. Meanwhile, its strong balance sheet and robust free cash flows indicate that Kinross Gold could continue to boost shareholders’ returns through dividend payments and share repurchases.
Let’s wrap up with Enbridge (TSX:ENB)(NYSE:ENB) stock, which is trading at NTM EV/EBITDA and P/E multiple of 12.2 and 16.8, respectively. Its forward valuation multiples are still lower than the historical average, indicating further upside in its stock. Further, the recovery in its mainline volumes amid improving energy demand positions it well to deliver superior returns.
Enbridge’s diversified assets, contractual arrangements, momentum in the core business, and strong secured capital program indicate that Enbridge could continue to deliver robust cash flows. Meanwhile, Enbridge’s long dividend payment history and stellar yield of 6.6% make it attractive income stock trading at a lower valuation.
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 Enbridge. The Motley Fool recommends Absolute Software Corporation and BANK OF NOVA SCOTIA.