The pullback in share prices of publicly listed companies allows investors to go bottom fishing and buy the dip. In the last 12 months, several stocks across sectors have been pummeled, making multiples attractive to value investors. A few of these companies are trading well below their intrinsic value and are poised to deliver outsized gains to shareholders in 2023 and beyond.
Here, I have identified two such cheap stocks you can buy right now.
Trisura Group
Operating in the specialty insurance segment, Trisura Group (TSX: TSU) is valued at a market cap of $1.6 billion. It is involved in insurance verticals such as surety, risk solutions, corporate insurance, and fronting.
Trisura is a fast-growing company and has increased sales from $137.5 million in 2019 to $350 million in 2021. In the last 12 months, it has reported revenue of $483 million, valuing it at less than four times trailing sales: an acceptable ratio given its growth rates.
TSU stock has been among the top-performing TSX stocks in recent years and has returned close to 450% to investors since March 2018.
In the first nine months of 2022, Trisura’s gross premiums written surged 64% year over year to $1.76 billion, allowing the company to increase sales by 54.8%.
Its stellar top-line growth also allowed Trisura to report a net income of $65 million in the last three quarters, indicating an increase of 24.4% compared to the year-ago period.
In order to support growth across its platform and strengthen its balance sheet, Trisura also raised $144 million via an equity offering in the third quarter (Q3) of 2022.
Trisura has a well-capitalized balance sheet and ended Q3 with a debt-to-capital ratio of 12.5% — well below its long-term target of 20%. It has enough liquidity to meet capital requirements, fund its operations, and support existing business plans.
Analysts remain bullish on TSU stock and expect it to gain around 80% in the next 12 months.
Exchange Income
A company that offers a monthly dividend payout to investors, Exchange Income (TSX: EIF) should be on your watchlist in March 2023. Exchange Income’s aviation and aerospace business provides scheduled airline, cargo, charter services, and emergency medical services in Canada. Additionally, its manufacturing segment produces goods and related services for multiple industries in North America.
Exchange Income has distributed dividends every month since 2004 due to a diversified portfolio of subsidiary companies allowing it to report cash flows across market cycles.
Exchange Income has increased dividends 16 times since 2004 and distributed around $700 million in cash dividends to date.
EIF stock has also returned 20% annually in the last 18 years, making it among the best-performing TSX stocks in this period. Despite these market-beating returns, EIF currently offers shareholders a forward yield of 5%.
Valued at a market cap of $2.2 billion, EIF is priced at one time forward sales and 14 times forward earnings, which is very cheap. Analysts expect Exchange Income to increase adjusted earnings by more than 15% annually in the next two years.
The stock is currently priced at a discount of 20%, given consensus price target estimates. After adjusting for dividends, total returns may be closer to 25% in the next 12 months.
