3 Undervalued TSX Stocks to Buy Today

Here are top TSX stocks that are trading way below their fair values.

| More on:

Image source: Getty Images.

As aggressive rate hike is expected to continue from central banks, valuations will increasingly drive shareholder returns. Here are three such TSX stocks that look attractive from a valuation perspective.  

Vermilion Energy

There are several reasons to be bullish on Vermilion Energy (TSX:VET)(NYSE:VET) stock. Its large exposure to Europe operations and sky-high natural gas prices in the continent could notably boost its financials in the next few quarters.

The company is already seeing record free cash flow growth since the pandemic. As a result, Vermilion repaid debt and reinstated shareholder dividends this year. So, there have been improvements all around fundamentally, be it on the profitability or on the balance sheet front.

VET stock has rallied 305% since last year and 100% so far in 2022. Despite the surge, the stock is still trading at a 2022 free cash flow yield of 32%, which is way higher than average. It is trading seven times its earnings and looks far discounted.

TSX energy stocks will likely continue to outperform due to a strong price environment and relatively attractive valuation. Considering the balance sheet improvement, solid earnings, and dividend growth prospects, and undervalued stock, Vermilion Energy could outperform its peers.

goeasy

Canadian consumer lender goeasy (TSX:GSY) has been an immense value creator for the last several years. It has seen superior earnings growth all these years due to a large addressable market and its efficient operations.

GSY stock surged from $96 to $145 levels in late July. However, it has been equally quick to drop as well recently and lost 20% in late August. Despite the volatility, GSY is an attractive bet for long-term investors.

The company lends to non-prime borrowers at higher interest rates. It posted a 66% increase in loan originations to $628 million in the second quarter of 2022. Its net income nearly doubled to $38 million for the quarter. goeasy’s large loan portfolio, careful underwriting, and new product lines like auto loans will likely support its earnings growth in the long term.  

GSY stock is currently trading 2.4 times its book value, which is lower than its historical average. The stock will likely soar higher, driven by its handsome financial growth potential.

Nutrien

Canada’s leading fertilizer company Nutrien (TSX:NTR)(NYSE:NTR) offers handsome growth prospects for long-term investors. The stock is currently trading 20% lower than its 52-week highs and looks attractive from a valuation standpoint.

Nutrien reported a net income of $5 billion in 2022 so far, an increase of more than four times compared to the same period last year. The growth was largely driven by solid production and a strong price environment. Moreover, fertilizers are expected to continue to trade in the higher price range mainly because of the war in Europe.

As a result, Nutrien might continue to see superior earnings growth in the next few quarters. Perhaps the stock is trading eight times its earnings and looks undervalued. Higher earnings growth and margin expansion with an attractive valuation will likely create notable shareholder value.

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.

The Motley Fool recommends Nutrien Ltd and VERMILION ENERGY INC.  Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

More on Dividend Stocks

Target. Stand out from the crowd
Dividend Stocks

3 Oversold Stocks to Buy for Passive Income

These three oversold stocks aren't just great right now for high passive income, but provide exposure to high-growth industries.

Read more »

money cash dividends
Dividend Stocks

TFSA Passive Income: Invest $30,000 to Earn $500,000 + $7,800 in Tax-Free Dividends

Make the power of compounding work for you and turn a $30,000 investment into $500,000 in the next 20 years.

Read more »

Wireless technology
Dividend Stocks

5 Things to Know About Telus (TSX:T) Stock

Telus offers a diversified business model and steady dividend growth. Is it a buy in this market?

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

These 2 Canadian Dividend Stocks Are a Retiree’s Best Friend

Retirees can expect these companies to pay uninterrupted dividends and grow their payouts in the coming years.

Read more »

A stock price graph showing declines
Dividend Stocks

Here’s Why I’m Confident About Investing Through the Down Market

There is no bear market in history that has not been followed by a bull cycle. Rather than fret over…

Read more »

Business man on stock market financial trade indicator background.
Dividend Stocks

2 Undervalued Canadian Stocks Worth a Buy Right Now

Two Canadian stocks are strong buys right now because their current share prices are way below their true values.

Read more »

falling red arrow and lifting
Dividend Stocks

Why Bank of Nova Scotia (TSX:BNS) Stock Fell to Two-Year Lows Last Week

Should you buy BNS stock at such depressed levels?

Read more »

Caution, careful
Dividend Stocks

This Incredibly Common Mistake Can Come Back to Bite Dividend Investors

Are you thinking of buying dividend stocks? Keep these characteristics in mind!

Read more »