3 Top TSX Stocks for October

Investors can look to invest in undervalued stocks such as Toronto-Dominion Bank to derive market-beating gains in the next year.

| More on:
analyze data

Image source: Getty Images

The equity markets are expected to remain choppy given rising inflation rates, slower-than-expected economic recovery, and the possibility of higher bond yields. Several analysts are also watching the impact of Evergrande’s financial crisis on the world economy. Given the uncertainties surrounding global markets, it makes sense to place your bets on fundamentally strong companies trading at attractive valuations.

We’ll look at three top undervalued TSX stocks that you can buy right now.

AltaGas

A stock that has gained over 55% in market value in the last 12 months, AltaGas (TSX:ALA) has significant upside potential, given its current valuation. AltaGas is a diversified energy infrastructure company that has two primary business segments. Its utilities business owns and operates regulated natural gas distribution utilities as well as two regulated natural gas storage facilities. It also provides interstate natural gas transportation and storage services to homes and businesses. The midstream business is engaged in the natural gas gathering and processing and natural gas liquids extraction, transmission, and storage.

AltaGas has increased its revenue from $2.61 billion in 2018 to $5.58 billion in 2020. In the last 12-month period, sales grew to $7.75 billion and are forecast to touch $7.43 billion this year. Comparatively, its earnings per share grew at an annual rate of 19.3% in the last five years.

AltaGas stock is currently trading at a forward price-to-sales multiple of less than one and price-to-earnings multiple of 13.9. Analysts expect the stock to rise by 18% in the next 12 months. After accounting for its dividend yield of 4%, annual returns will be closer to 22%.

Toronto-Dominion Bank

One of the largest companies in Canada, Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has generated close to 80% for investors in dividend-adjusted returns in the last five years. It currently offers a forward yield of 3.73% to investors, making it attractive for those seeking income as well as capital appreciation over the long term.

An improved economy allowed TD to report an after-tax net income of $3.6 billion and adjusted earnings of $1.96 in the fiscal second quarter ended in July. The company explained robust revenue growth in its personal and commercial banking businesses as well as rising customer activity positively impacted volumes and fee income. Due to lower provisions for credit losses, margins pressure eased as well.

TD stock is forecast to increase its adjusted earnings at an annual rate of 17.6% annually in the next five years. Bay Street expects TD shares to rise by 12% in the next year. After accounting for dividends, annual returns will be closer to 16%.

Great-West Lifeco

The final stock on my list is Great-West Lifeco (TSX:GWO), a company that also offers investors a forward yield of 4.6%. This financial services holding company has increased its revenue from $47 billion in 2018 to $60.59 billion in 2020. Analysts now expect sales to grow to $64 billion in 2021 and $67 billion in 2022.

This will allow Great-West Lifeco to increase its earnings at an annual rate of 9% in the next five years. The stock is trading at an attractive price-to-forward-sales multiple of 0.60 and a price-to-forward-earnings multiple of 11.4.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends ALTAGAS LTD.

More on Bank Stocks

Question marks in a pile
Bank Stocks

Should You Buy Canadian Western Bank for its 4.8% Dividend Yield?

Down 35% from all-time highs, Canadian Western Bank offers a tasty dividend yield of 4.8%. Is the TSX bank stock…

Read more »

analyze data
Bank Stocks

The Average Canadian Stock Investor Owns This 1 Stock: Do You?

This Canadian stock has about 49% ownership by the public, and with growth and dividends to consider, it's a top…

Read more »

falling red arrow and lifting
Stocks for Beginners

1 Dividend Stock Down 18% to Buy Right Now

CIBC (TSX:CM) is a strong dividend stock investors should certainly consider not just for passive income, but future growth as…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Tech Stocks

Forget TD Stock: 2 Tech Stocks to Buy Instead

TD remains a solid income stock but two outperforming tech stocks are better buys for their strong growth and upside…

Read more »

Question marks in a pile
Bank Stocks

Where Will Royal Bank of Canada Stock Be in 5 Years?

Royal Bank's continued focus on a strong capital position plus its acquisition of HSBC will likely ensure prosperous times ahead.

Read more »

Payday ringed on a calendar
Bank Stocks

How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $10,000 and TD Stock

TD (TSX:TD) stock has been a poor performer over the last few years, but could be a big passive-income winner…

Read more »

Man considering whether to sell or buy
Bank Stocks

Is RBC Stock a Buy, Sell, or Hold?

Shares of Royal Bank of Canada have delivered game-changing returns to shareholders in the last two decades. Is RBC stock…

Read more »

Dice engraved with the words buy and sell
Bank Stocks

Is Scotiabank (BNS) Stock a Buy, Sell, or Hold?

Let's dive into whether the Bank of Nova Scotia (TSX:BNS) remains a solid buy or if it's more of a…

Read more »