Amid the continued geopolitical tensions, inflationary environment, and the expectation of interest rate hikes, the volatility in the global equity markets has increased over the last few weeks. However, the sell-off in some quality stocks is overdone, thus providing excellent buying opportunities for long-term investors. As the markets gyrate, here are two bargain stocks you can buy and hold forever.
Image source: Getty Images
Algonquin Power & Utilities
Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN) is a utility and renewable power-generating company that has delivered impressive returns of over 330% over the last 10 years at a CAGR (compounded annual growth rate) of 15.7%. The company’s revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) have grown at an impressive CAGR of 23% and 26% during this period, respectively. This solid performance and strategic acquisitions have increased its stock price.
Meanwhile, the company sells around 82% of the power produced from its renewable power-producing facilities through long-term contracts, thus avoiding price and volume fluctuation. Besides, its low-risk, regulated assets generate stable and reliable earnings irrespective of the economic outlook. Supported by these predictable earnings, Algonquin Power & Utilities has raised its dividends at a CAGR of over 10% for the last 12 years, with its forward yield (next 12 months) standing at a juicy 5.3%.
As it pivots towards cleaner energy, the company has planned to make capital investments of approximately US$12.4 billion from 2022 to 2026, with US$8.8 billion in regulated utility assets and the remaining US$3.6 billion in renewable energy. These investments could increase its rate base at a CAGR of 14.6% through 2026 while growing its adjusted EPS at an annualized rate of 7-9%. Additionally, the company could also benefit from a more rapid transition towards cleaner energy.
Despite its healthy growth prospects, Algonquin Power & Utilities trades more than10% lower than its 52-week high, while its NTM (next 12 months) price-to-earnings multiple stands at 17.9. So, considering its solid track record, healthy growth prospects, and attractive valuation, I believe Algonquin Power & Utilities would be an excellent stock to have in your portfolio.
Nuvei
Nuvei (TSX: NVEI)(NASDAQ: NVEI) provides its customers with payment technology solutions. It supports 150 currencies and more than 570 alternative payment methods (APM) across 200 markets. The growth in e-commerce during the pandemic accelerated the adoption of digital transactions, thus driving the company’s stock price.
However, amid the expectation of growth slowing down, a short report from Spruce Point Capital Management, and an expensive valuation, the company has witnessed a steep sell-off over the last few months, with its stock price currently trading over 78% lower than its 52-week high. Amid the sell-off, the company’s NTM price-to-earnings has declined to 15.6, lower than its historical average.
Nonetheless, Nuvei continues to post solid financials, with its volumes and revenue growing by 40% and 30% in the first six months of this year, respectively. Organic growth, as well as strategic acquisitions, boosted its growth. Along with top-line growth, NVEI’s adjusted EBITDA and adjusted EPS increased by 27% and 22%, respectively. Cash flow from operations increased by 13% to US$157.2 million while closing the second quarter with a cash balance of $721.6 million. So, the company is well-positioned to fund its growth initiatives.
The growing adoption of digital transactions has created multi-year growth potential for Nuvei. Meanwhile, the company is expanding its APM portfolio, venturing into new markets, and developing innovative solutions to capture the growing demand for digital payment solutions. Besides, it serves regulated sports betting and iGaming operators in Canada and the United States. The increasing legalization of sports betting is expanding the addressable market for Nuvei.
With strong growth prospects, the company’s management expects its volumes and revenue to grow 30% annually in the medium term, while its adjusted EBITDA margin could cross 50% in the long run. So, considering all these growth drivers, I am bullish on Nuvei.
