Looking for Cheap Stocks? These 3 Tech Stocks Offer Reasonable Value

These fundamentally strong tech stocks are trading cheap and provide an opportunity for investors to benefit from the recovery in their prices.

| More on:
Overhead shot of young adults using technology at a table

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Thanks to the sharp selling in the market, several TSX tech stocks are trading at a reasonable valuation. This is an opportunity to buy tech stocks cheap and benefit from the recovery in the medium term. Here are my top three picks. 

Shopify

Shares of the e-commerce company Shopify (TSX:SHOP)(NYSE:SHOP) have fallen about 78% from its 52-week high. While Shopify’s growth could remain muted in the short term, I see this correction in price as a solid opportunity to invest. 

Undeniably, the worsening of the macro headwinds and fear of the economic slowdown could keep Shopify stock volatile in the short term. However, the company’s growing market share and increased penetration of e-commerce as a percentage of overall retail sales provide a multi-year growth opportunity for the company. 

Further, the company’s growth measures, including accelerated investments in fulfillment, sales, and marketing, bode well for long-term growth. Moreover, its initiatives like the expansion of product offerings, entry into the newer markets, and addition of new sales and marketing channels (including social commerce) will likely accelerate its growth. 

Shopify’s next 12-month EV/sales multiple of 6.9 appears reasonable given its high-growth prospects and makes it a solid recovery play once macro headwinds ease. 

WELL Health

Thinking of investing in tech stocks? Consider buying the shares of WELL Health (TSX:WELL). What stands out is that WELL Health has maintained its growth rate and continues to grow rapidly, despite the reopening of the economy. 

While its stock price has lost substantial value in the recent selling in the market, WELL Health’s revenue is growing fast, while it continues to deliver positive adjusted EBITDA. This supports my bullish view. For context, WELL Health’s revenues surged about 395% during the last reported quarter. Strong omnichannel patient visits and benefits acquisitions drove its top line. 

WELL Health raised its full-year revenue outlook and remains confident in sustaining its high growth due to continued strength in organic sales. Further, WELL Health is ramping up its M&A activities to accelerate its growth and strengthen its competitive positioning. 

Its growing scale and sales leverage will likely drive its free cash flows. Moreover, WELL Health expects to remain profitable in 2022, which is positive. 

WELL Health’s next 12-month EV/sales multiple stands at 2.3, which is attractive given the ongoing momentum in its business. 

Enghouse 

Enghouse (TSX:ENGH) stock gained substantially amid the pandemic, as the COVID restrictions drove demand for its digital offerings that supported remote work and communications. However, its growth normalized due to the easing of restrictions, which led to selling in its stock price. 

While Enghouse’s growth decelerated due to the tough year-over-year comparables, its focus on accretive acquisitions and internal growth will likely support its stock. 

It has consistently increased its revenue and adjusted EBITDA at a healthy pace. Moreover, the ongoing digital shift, progress on multiple large professional services projects, cloud-based recurring revenues, and price increases will likely drive its financials. Also, operational efficiencies could continue to cushion its earnings. 

Enghouse runs a profitable business and generates solid cash flows that fund its growth initiatives and dividend payments. Also, it is debt free and has a strong balance sheet. 

Enghouse stock has dropped over 47% from its 52-week high, representing a good opportunity for buying.

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 has positions in and recommends Enghouse Systems Ltd. and Shopify.

More on Tech Stocks

Dollar symbol and Canadian flag on keyboard
Tech Stocks

3 Top Canadian Growth Stocks to Buy in July

Here are three growth stocks you might want to add to your buy list in July.

Read more »

Various Canadian dollars in gray pants pocket
Tech Stocks

2 Ultimate Growth Stocks to Buy Below $50

These under-$50 stocks have multiple growth catalysts that point to a steep recovery.

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

This 1 Tech Stock Has Surged 50% in the Last 2 Months: Should You Buy?

While the entire tech sector is in a selloff, one Canadian tech stock has jumped 50% in two months. Is…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

3 Growth Stocks Worth Buying if You Can Handle Volatility

Are you an investor that isn’t scared of a little volatility? Here are three top picks!

Read more »

edit U-turn
Tech Stocks

Can Shopify (TSX:SHOP) and Lightspeed (TSX:LSPD) Recover Before 2023?

Shares of these omnichannel commerce-enabling companies are down over 80%, creating a solid buying opportunity.

Read more »

Tech Stocks

These 3 Cheap Stocks Would Be an Excellent Addition to Your Portfolio

Given their attractive valuation and solid growth potential, these three stocks would be an excellent addition to your portfolio.

Read more »

Growing plant shoots on coins
Tech Stocks

Market Correction: Don’t Miss These TSX Growth Stocks

Long-term investors shouldn’t miss this correction to accumulate top TSX growth stocks at prices well below their highs.

Read more »

Shopping and e-commerce
Tech Stocks

Shopify (TSX:SHOP): Why Did it Fall So Violently in 2022?

The TSX’s tech phenomenon fell sharply in 2022 due to slowing revenue growth, soaring inflation, and rising interest rates.

Read more »