This Oversold Stock Is a Must-Buy in My Book

This oversold stock continues to be recommended by analysts, yet it has fallen drastically, providing you with an opportunity to pick it up in bulk!

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It’s actually been pretty difficult to find an oversold stock to discuss as of late. While the market is down, there are still few companies that trade within oversold territory. However, there is one that recently hit that mark, and it’s one I’d consider a must buy on the TSX today.

What’s an oversold stock anyway?

Before I get into the oversold stock in question, what makes a company’s share price oversold in the first place? There are a few ways to look at it, but the technical version is by looking at the Relative Strength Index.

In this case, a Relative Strength Index looks at the momentum that a company’s stock is being bought or sold. I won’t get into the actual calculation here, but I will tell you that a stock is oversold with a Relative Strength Index below 30. In the reverse, it’s considered overbought with a Relative Strength Index over 70.

Here, we’re going to look at an oversold stock that falls below that 30 mark. In fact, the one I’m recommending is currently at 24.35 as of writing.

Northland Power

I’ve written a few times about Northland Power (TSX:NPI), but now is the time I would seriously consider buying the oversold stock. Now in oversold territory, it’s a strong long-term hold on the TSX today.

This is from a few reasons. First, there’s the industry the company is in. Northland stock is in renewable energy, with a diverse range of assets across the globe. The diverse range includes everything from solar to wind power. And it continues to find new opportunities to expand.

Hence why I would consider this a strong long-term hold option. Northland stock in the renewable energy sector means it’s part of a shifting move towards the future of energy. What’s more, it isn’t limited to one type of energy. So, you can look forward to gaining returns from various sources in the future.

Pick up that dividend!

Perhaps the best reason to pick up this oversold stock, however, is the company’s dividend. Now, that Northland stock is oversold, you can certainly grab a deal while it offers a yield at 3.62%. Further, shares of the company are down about 11% in the last year, providing you with another deal as it trades at just 11.85 times earnings.

What’s remarkable is that investors continue to ignore the company, despite incredible earnings reports that beat out estimates time and again. Analysts reaffirmed this, with one stating it “sports the most attractive long-term growth among the renewable peers in our coverage universe.”

So, why the drop? About a month back, Northland stock scaled back its outlook for the year — not by much, but it was enough for investors to pullback. Now, that pullback has hit oversold territory. So, take the win!

Bottom line

Northland stock is now an oversold stock offering long-term value, dividends and a strong share price. Analysts continue to recommend the stock, as it beats estimates again and again. So, don’t let one scale back hold you back from picking up this company in bulk on the TSX today.

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.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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