When it comes to investing in stocks, you require patience more than upfront cash. A small but disciplined investment for a long-term period could fetch you a significant amount of wealth.
However, when it comes to investing in low-priced stocks, investors should be more cautious, as there could be good reasons for the stock’s low price. But this doesn’t indicate that all low-priced stocks are bad. There are a few quality TSX stocks that you can still buy for under $20 and generate market-beating returns in the long term.
Against this backdrop, let’s look at the three best TSX stocks still trading under $20 with solid growth prospects.
Bet on the digital healthcare sector with this under-$20 stock
Technological advancements are reshaping how we access healthcare services. While the pandemic accelerated the demand for digital healthcare services, the momentum in WELL Health’s (TSX: WELL) business (it’s a digital healthcare service provider) has sustained even amid easing restrictions, displaying the strength of its platform.
WELL Health continues to grow its revenues at a breakneck pace, reflecting solid omnichannel patient visits and benefits from acquisitions. While its revenues have marked over 100% growth in the first two quarters of 2022, it has consistently delivered positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) in the past several quarters. Further, the company has raised its 2022 guidance thrice this year.
WELL Health is confident of delivering record revenues in the third quarter (Q3). It recently announced preliminary patient visits data for Q3, which showed a 53% year-over-year jump in omnichannel patient visits. Further, WELL Health expects to exit 2022 with a positive adjusted net income. While WELL Health is growing rapidly, its stock has lost substantial value, thus making this tech stock an attractive long-term investment.
Rely on this under-$20 utility stock
Algonquin Power & Utilities (TSX: AQN) is a low-volatility stock that offers growth and income. Its low-risk utility business is supported by regulated assets that generate solid earnings. Further, its growing renewable power-generation capabilities will likely accelerate its growth. Thanks to its growing earnings base (earnings increased at a CAGR, or compound annual growth rate, of 11% in the past five years), Algonquin Power has raised its dividend for 12 years at an annualized growth rate of 10%.
Looking ahead, its low-risk utility assets will support earnings and dividend growth. Meanwhile, the expansion of its rate base (expected to increase at a CAGR of over 14%), strategic acquisitions, and growing installed renewable energy capacity augur well for growth.
Algonquin Power expects its adjusted earnings to increase at a CAGR of 7-9% annually through 2026. This implies that investors could expect the company to grow the future dividend that’s in line with the increase in earnings. Further, investors can earn a reliable dividend yield of 6.2% by investing at current levels.
A high-growth tech stock trading below $20
Despite the selloff in tech stocks, shares of Absolute Software (TSX: ABST) are up about 34% year to date. This strong growth amid economic weakness comes from its solid financial performance and strong customer demand (enterprise and government) for its security products amid the digital shift.
Absolute Software has been steadily growing its annual recurring revenues (increased at a mid-teens rate in the last five quarters). Further, Absolute Software’s adjusted earnings before interest, taxes, depreciation, and amortization has had a CAGR of 57 since FY18, which is encouraging.
Overall, Absolute Software is well positioned to capitalize on strong demand and deliver solid returns. It is expanding its addressable market through new products and services and strategic acquisition. Further, a high net dollar retention rate and cross-selling opportunities augur well for growth.
