Since the end of 2021, growth stocks have underperformed the broader indices by a wide margin. A challenging macro-environment has meant that multiples of several companies have experienced a drawdown in the past year. But the selloff has also meant you can find several stock trading at a bargain compared to historical valuations.
Here, I have identified three such cheap TSX stocks that are too cheap to ignore.
A fintech company that went public in late 2020, Nuvei (TSX:NVEI) is currently valued at a market cap of $6.30 billion. Nuvei offers a payment platform to businesses in 200 markets and more than 150 currencies.
Nuvei has focused on aggressive acquisitions to drive its top-line growth in recent years. For example, it more than tripled the total payments volume between 2018 and 2020. It again expects to triple this volume in 2022. Similarly, its revenue is expected to double in the last two years, and analysts expect the company to post sales of $1.13 billion in 2022.
Nuvei is priced at 15.8 times 2023 earnings, which is quite cheap for a high-growth stock. Comparatively, its adjusted earnings are expected to expand by 45% annually in the next five years.
Given consensus price target estimates, Nuvei stock is trading at a discount of almost 50% right now.
Founded in 1984, Aritzia (TSX:ATZ) is a vertically integrated design house with a widening presence. Valued at a market cap of $5.23 billion, Aritzia increased revenue by 37.8% year over year to $624.6 million in the fiscal third quarter of 2023 (ended in November). Comparatively, its adjusted net income rose 9% to $70.7 million, while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) surged by almost 10% to $119.6 million.
Despite an inflationary environment, Aritzia is on track to expand earnings by 22.5% annually in the next five years. Comparatively, ATZ stock is priced at 23.5 times forward earnings, which is reasonable given its growth estimates.
In fiscal 2022, Aritzia’s e-commerce sales rose by 33% year over year, accounting for 38% of total sales. In fiscal 2020, e-commerce sales accounted for less than 23% of total revenue. The company’s widening online sales have allowed it to deliver products in more than 200 countries.
Energy stocks, including Suncor (TSX:SU), have declined in recent months as oil prices have moved lower. However, the relaxation of COVID-19 restrictions in China and the Russia-Ukraine war will continue to result in elevated commodity prices in 2023, making Suncor a top bet right now.
Suncor is a Canada-based integrated energy, which is focused on developing the Athabasca oil sands, one of the largest petroleum basins in the world. Back in 1967, it was the first company to commercially produce crude oil from oil sands located in northern Alberta. Over the years, Suncor has expanded its presence and is now equipped with a balanced portfolio of cash-generating assets.
Suncor has generated massive wealth for long-term investors. The company went public in 1992 and has increased daily oil sands production by 600% in the last three decades. In this period, Suncor has returned close to 5,000% to shareholders in dividend-adjusted gains. Comparatively, the S&P 500 has returned 1,440% to investors in the last 30 years.
Despite its market-beating returns, Suncor stock is priced at five times forward earnings and is trading at a discount of over 20% compared to consensus price target estimates.