1 Undervalued TSX Stock to Buy Right Now

Are you looking for a strong value bet? This undervalued Canadian stock might be the perfect addition to your portfolio at current levels.

| More on:
analyze data

Image source: Getty Images

2022 started off on a horrible note for stock market investors. The S&P/TSX Composite Index’s performance was choppy. By the end of the first half, it was down significantly from its all-time highs. The market volatility does not seem like it will let up anytime soon amid the interest rate hikes and rising inflation.

Investors are worried about a recession on the horizon. Stock market investors who have been in the game for long enough look at volatile market environments as an opportunity to seek bargains on the stock market. Identifying and buying undervalued stocks can set you up for substantial wealth growth once markets recover and your investments rise to their inherent values.

As of this writing, the Canadian benchmark index is down by 5.9% year to date, but it appears to be on the mend. It is difficult to say whether we are in the middle of a market rebound or if there are more choppy market movements in store for investors. You can either use this bear market to your advantage by investing in value stocks or stay on the sidelines, waiting for things to stabilize.

If you feel inclined towards the former, investors could benefit by making investment decisions while the market is devalued.

Taking advantage of the correction before the rebound

The stock market correction might seem longer than the recent-most decline induced by the pandemic. The extended weakness could be because tech stocks have not rallied as they did amid the pandemic. Several high-flying tech stocks soared to new heights due to industry tailwinds created by the global health crisis.

After putting up stellar multi-bagger returns, the tech meltdown saw some of the biggest names in the industry go during a massive pullback. It remains to be seen whether tech stocks will recover to their pandemic highs. However, value-seeking investors can capitalize on other possible bargains before the relief rally in stock markets.

A diversified asset management firm

Onex Corp. (TSX:ONEX) is a $5.9 billion market capitalization diversified investment management company. Headquartered in Toronto, Onex is the name behind several successful businesses, including WestJet Airlines. As of this writing, Onex boasts almost US$50 billion in assets under management. Trading for $69.23 per share, Onex stock is down by almost 32% from its 52-week high.

The pandemic was not kind to Onex stock. The stock posted a significant post-pandemic recovery. However, another pullback led to a major decline in its valuation. The company recently released its second-quarter earnings report for fiscal 2022, and it did not bear good news.

The value of the company’s private equity investments fell by 3% from the previous quarter, and it attributed the decline to macroeconomic factors. However, the asset manager grew its portfolio by 16% in the last 12 months. The company’s earnings, from fees related to a growing number of assets, resulted in a loss of $10 million — a drastic decline from its $1 million profit for the same quarter last year.

Foolish takeaway

The recent-most quarter does not paint a pretty picture for the company’s investors. The challenging global economic factors keep weighing down on the company. However, its management says it is focused on growing its asset management business and leveraging its diversified portfolio to deliver sustained performance.

The top brass in the company believes it is a strong and stable partner for its investors, especially in times of change and challenge. The asset manager is undoubtedly facing a challenge right now. At current levels, Onex stock trades for a 0.55 price-to-book multiple, well below its five-year average of 1.5. If you are willing to assume the risk of investing in this stock, it could be a worthwhile long-term investment.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Investing

Money growing in soil , Business success concept.

2 Great Dividend-Growth Stocks to Stash in a TFSA for Decades

CN Rail (TSX:CNR) and another dividend grower look cheap enough to own in a TFSA value fund for the long…

Read more »

Canada day banner background design of flag

Essential RRSP Stocks: 2 Canadian Picks to Secure Your Retirement

Two dividend stocks are ideal anchors for Canadians intending to contribute to their RRSPs in 2024 and save for retirement.

Read more »

A Canada Pension Plan Statement of Contributions with a 100 dollar banknote and dollar coins.

5 Strategies for Maximizing Your CPP Benefits in 2024 and Beyond

Are you looking for the best way to max out your CPP benefits? Here are some tips you may not…

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

Better Artificial Intelligence Stock: UiPath vs. C3.ai

Deciding between UiPath and C3.ai isn't easy since both have strengths and weaknesses.

Read more »

data analyze research

The 1 Stock to Own in a Sideways Economy

Here's why Restaurant Brands (TSX:QSR) remains a top TSX stock investors shouldn't ignore for long-term gains in this market.

Read more »

Retirees sip their morning coffee outside.

Here’s the Average RRSP Balance at Age 65 and 71 in Canada

Canadian investors can consider holding dividend stocks and supplement their CPP and RRSP payouts in retirement.

Read more »

Dividend Stocks

10 Years From Now, You’ll Be Glad You Bought These Magnificent TSX Dividend Stocks

The TSX is lucrative to buy these magnificent dividend stocks in bulk and be proud of this decision 10 years…

Read more »

sale discount best price
Energy Stocks

Time to Pounce: 1 Phenomenal TSX Stock That Hasn’t Been This Cheap in a While

Now could be the time to get into Cameco (TSX:CCO) stock, which is up 81% in the last year but…

Read more »