The equity indices continue to trade near record highs, despite rising inflation rates, the threat of the Omicron variant, and sky-high valuations. So, while a market pullback is warranted, there are a few stocks trading at a cheap valuation, making them attractive to value investors.
We’ll take a look at three such TSX stocks that are well poised to outpace the TSX in the future.
Algonquin Power & Utilities
A Canada-based company valued at a market cap of $12 billion, Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) should be on the radar of long-term investors. In Q3 of 2021, AQN increased revenue by 40% year over year to $528.6 million, while adjusted EBITDA rose by 27% to $252 million. Its adjusted net earnings rose by 11% to $97.6 million, or $0.15 per share.
In October, Algonquin announced that its indirect subsidiary Liberty Utilities will acquire Kentucky Power Company and AEP Kentucky Transmission Company for a purchase price of $2.846 billion. The acquisition will add $2.2 billion of regulated rate base assets to AQN’s portfolio, which means around 80% of the company’s business mix will be regulated, once the transaction is completed.
Algonquin’s regulated base of assets allows the company to pay investors an annual dividend per share of $0.85, indicating a forward yield of 4.81%. Analysts tracking AQN stock also have a 12-month price target of $21.66, which is 22% higher than its current trading price. After accounting for its dividend yield total returns will be closer to 27%.
One of the top-performing stocks on the TSX in the past decade, goeasy (TSX:GSY) has returned 3,600% to investors in dividend-adjusted gains since December 2011. GSY stock is also down 19% from record highs, allowing you to buy the dip.
Despite its market-thumping gains, goeasy offers investors a forward yield of 1.5%. Valued at a market cap of $2.93 billion, goeasy is forecast to increase sales from $652 million in 2020 to $985 million in 2022. Its earnings are also forecast to increase at an annual rate of 12% in the next five years.
goeasy shares are valued at a forward price-to-2022 sales multiple of three and a price-to-earnings multiple of 14.8, which is extremely reasonable given the company’s growth estimates.
Analysts tracking GSY stock expect to gain close to 35% in the next 12 months.
Brookfield Renewable Partners
The final stock on my list is Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP), which has returned over 500% to investors in the last decade. However, it’s also down 28% from all-time highs. One of the largest renewable energy companies, BEP offers investors a forward yield of 3.3%. Since 2010, it has increased dividend payouts at an annual rate of 6% and expects distributions to grow between 5% and 9% in the future.
Brookfield Renewable, in fact, aims to provide annual returns of 15% to investors over the long term, and given the tailwinds surrounding renewable energy, the company is well positioned to meet its lofty goals.
Further, Brookfield’s diversified base of cash-generating assets and recent additions to its widening portfolio enabled the company to increase funds from operations to $0.33 per share, or $210 million, an increase of 32% year over year.