2 Canadian Stocks That Are Great Deals in February 2023

Two Canadian stocks will likely outperform this year.

| More on:
Dollar symbol and Canadian flag on keyboard

Image source: Getty Images

Markets look well placed to climb higher this year after a significant drop in 2022. Here are two Canadian stocks that could outperform peers in 2023.

Canadian Natural Resources

Canadian Natural Resources (TSX:CNQ) stock is currently trading 10% lower than its 52-week highs last year. With its strong earnings-growth prospects and a favourable macro setting, CNQ will likely breach those levels and once again create decent shareholder value.

Oil and gas prices currently have been lower than last year but are still in the higher range historically. They are expected to climb further this year, with increasing demand and shrinking supply. Chinese re-openings will be a key factor that will drive oil demand. At the same time, declining Russian supply will likely make the equation all the more skewed in 2023.

As a result, oil producers like CNQ should see another year of higher earnings growth. Canadian Natural is Canada’s biggest oil producer and aims to produce 1.35 million barrels of oil per day this year.

Even if oil prices linger around current levels, Canadian oil-producing companies will likely see superior earnings growth. And that’s because of their lower interest expenses this year. Almost all energy producers followed capital discipline in the last few years and aggressively repaid debt.

CNQ’s net debt has almost halved since the pandemic. So, a large portion of its free cash flows will now go toward share buybacks this year. Including dividends and share buybacks, CNQ returned more than $10 billion in 2022. In 2023, it is expected to earn free cash flows of $10 billion, another stellar year financially.

CNQ stock has returned 25% in the last 12 months, following TSX energy stocks. It is trading at a free cash flow yield of 11% and looks overvalued compared to peers. However, the premium is justified, driven by its low-cost assets, healthy margin profile, and sturdy balance sheet.


The yellow metal seems to be in great touch lately with looming recession fears and slowing rate hikes. Canadian gold miner B2Gold (TSX:BTO) is an appealing bet to play the gold rally.

BTO stock is up more than 20% since October, while gold has gained around 15% in the same period. BTO is still 25% lower than its 52-week high of $6.4 in April last year. Higher gold prices will likely boost its earnings this year, creating a decent shareholder value.

B2Gold produced a total of 1.03 million ounces of gold last year and aims to produce 1.04 million this year.

Rapidly rising interest rates weighed on gold as they pushed Treasury yields and the U.S. dollar higher last year. If the rate-hike cycle pauses by mid-2023, that will be a big boost for the yellow metal.

BTO is trading 21 times its earnings and is fairly valued compared to peers. It currently yields 3% — one of the highest yields among TSX gold miners. Its low leverage and healthy margin profile also stand tall among peers. If gold prices maintain strength amid easing macroeconomic issues, BTO will likely outperform peers.

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 B2Gold and Canadian Natural Resources. The Motley Fool has a disclosure policy. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

More on Dividend Stocks

stock analysis
Dividend Stocks

Buy These TSX Dividend Shares Next Week

Are you looking for dividend stocks to add to your portfolio? Buy these picks next week!

Read more »

edit Safety First illustration
Dividend Stocks

3 of the Safest Dividend Stocks in Canada

These three dividend stocks are all high-quality companies with defensive operations, making them some of the safest investments in Canada.

Read more »

A person builds a rock tower on a beach.
Dividend Stocks

3 Stocks to Anchor Your Portfolio in a Rocky Market

Three stocks are solid anchors in any portfolio today for their outperformance in a weak market and defiance of the…

Read more »

money cash dividends
Dividend Stocks

3 Solid Dividend Stocks That Cost Less Than $30

Given their solid financials and healthy cash flows, the following under-$30 dividend stocks are a good buy in this volatile…

Read more »

grow money, wealth build
Dividend Stocks

2 High-Yield Dividend Stocks With Rock-Solid Payout Ratios

These two dividend stocks offer unbelievably high yields of more than 7% and earn more than enough free cash flow…

Read more »

Dividend Stocks

5 Steps to Making $500 in Monthly Passive Income in 2023

Generating monthly passive income isn't as hard as it sounds. Here are 5 steps to start making $500 every month.

Read more »

sad concerned deep in thought
Dividend Stocks

Worried About a Recession? Invest in This Stable Dividend Stock to Rest Easy

Stable dividend stocks bought primarily for their payouts can offer you surety of returns, even during a recession.

Read more »

A golden egg in a nest
Dividend Stocks

How to Turn $50,000 Savings Into a Generous Nest Egg in 2 Decades

Build a generous nest egg in 20 years by investing your accumulated savings in Dividend Aristocrats and holding them in…

Read more »