Over the last few years, there have been many opportunities for investors to buy the best stocks as several have traded cheaply for one reason or another. There’s no question, though, that of all the stocks in Canada, Corus Entertainment (TSX: CJR.B) continues to offer some of the best value, as the stock continues to trade unbelievably undervalued.
The stock has been selling off for a while now in larger part due to the economic environment and the fact that Corus has had some trouble with its debt in the past.
So, it’s certainly an investment that does have some risk, as does every stock you consider. But when you look at just how cheap it’s gotten lately, Corus now seems like one of the best stocks you can buy, especially if you’re a long-term investor with patience.
The company has been earning strong and consistent cash flow for years, which is why it’s so attractive today. And despite the fact that it’s had problems with its debt load in the past, throughout the last few years, Corus has made meaningful progress in paying down that debt.
Therefore, the stock is now in a much better position financially. So, let’s look at whether Corus is one of the best stocks to buy now.
Corus stock is ultra-cheap
One of the first reasons to look at Corus and evaluate whether it’s one of the best stocks to buy now comes down to its valuation. Any time you can buy stocks severely undervalued, you create a significant margin of safety.
However, none of that matters if the company’s operations will continue to worsen and its earnings over time continue to fall. With Corus, though, that doesn’t seem to be the case. Even with significant headwinds created by the pandemic, its operations have proven to be highly resilient lately.
Therefore, with Corus now trading at a forward price-to-earnings ratio of just 5.2 times, it’s clear just how undervalued the stock is. Even its forward enterprise value to EBITDA ratio is extremely low, currently at just 4.7 times.
And because the stock has sold off so significantly this year, its dividend now offers a whopping 6.6% yield. That may seem high, and often high yields can be a red flag that the dividend will need to be cut. However, looking at Corus’s financial performance over the last year, that considerably attractive dividend has a payout ratio of just 35%, making it ultra-safe.
So, if Corus is so cheap, why does it continue to sell off?
Is Corus one of the best stocks to buy now?
While Corus is cheap, one of the most compelling reasons to buy the stock is due to all the free cash flow that it’s constantly earning. This has been crucial as of late in order to help pay down debt and get the company in a much better position going forward.
Despite this progress, the stock hasn’t budged. But as management recently highlighted, the value that Corus has created for investors in recent years shouldn’t be ignored.
In fact, since September of 2018, less than four years ago, Corus has spent $944 million of its free cash flow, creating value for investors. The majority of that has gone to paying down debt. However, it’s also recently begun to buy back shares. In addition, it’s constantly returning capital to shareholders through its dividend.
But what’s most impressive about the fact that it’s spent $944 million creating value for investors over the last four years is that Corus’s market cap today sits at just $725 million.
Therefore, if you’re looking for an ultra-cheap stock to buy that can earn attractive cash flow and return you an impressive dividend, then there’s no question that Corus Entertainment is one of the best stocks to buy now.
