3 Undervalued TSX Stocks to Buy in March 2023

Investors looking to buy undervalued TSX stocks can consider adding shares of Shawcor and benefit from outsized gains this year.

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While the equity markets staged a comeback in January this year, they pulled back once again last month. The macro environment is expected to remain tough, which suggests the stock market will be volatile in the near term. Yes, it’s impossible to time the market bottom, but the ongoing turbulence still allows you to go bargain hunting and buy the dip.

Here are three such undervalued TSX stocks you can buy in March 2023.

Shawcor stock

A material sciences company, Shawcor (TSX:SCL) serves multiple global markets such as infrastructure, energy, and transportation. Valued at a market cap of $1 billion, Shawcor reported sales of $1.17 billion in the last 12 months.

Analysts expect the company’s top-line growth to accelerate by 10% year over year to $1.25 billion in 2022 and by 42% to $1.78 billion in 2023. Bay Street expects it to report adjusted earnings of $2.05 per share in 2023 compared to a loss of $1.12 per share in 2021.

So, Shawcor stock is priced at 0.6 times forward sales and seven times forward earnings, which is really cheap.

The company ended the third quarter (Q3) with a 72% growth in total backlog as demand for offshore pipe coating continues to develop. An uptick in sales allowed Shawcor to reduce working capital by $34.4 million in Q3 and repay over $200 million of debt since the start of 2021.

It ended the September quarter with a net debt to adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio of 1.46, which is within the company’s target.

Ag Growth International stock

A company that manufactures and distributes grain & rice handling, storage, and conditioning equipment in Canada and other international markets, Ag Growth International (TSX:AFN) is valued at $1.07 billion by market cap.

Ag Growth International provides infrastructure to support the agriculture sector. It has 31 manufacturing facilities located in Canada, the U.S., Brazil, France, and India.

Priced at 0.7 times forward sales and 12.9 times forward earnings, AG Growth International is trading at an enticing valuation. The undervalued TSX stock also offers investors a dividend yield of 1.1%.

Martinrea International stock

The final undervalued TSX stock on my list is Martinrea International (TSX:MRE), which manufactures and sells metal parts, modules, fluid management systems, and aluminum products to companies part of the automotive industry in North America and other international markets.

Martinrea is among the leading tier-one automotive suppliers in categories such as lightweight structures and propulsion systems. It is also one of the fastest-growing auto parts suppliers in the last two decades, with 58 locations in 10 countries.

Martinrea reported record revenue of $4.75 billion in 2022 — an increase of 25.7% year over year. Its adjusted EBITDA also rose 62.4%, allowing the company to report a free cash flow of $50.2 million in 2022.

Martinrea is forecast to increase sales to $5.3 billion in 2024, while adjusted earnings are estimated at $3.05 per share. So, Martinrea stock is priced at just 4.9 times forward sales and 0.22 times forward earnings.

Analysts remain bullish on this TSX stock and expect it to return around 30% in the next 12 months.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shawcor. The Motley Fool recommends Ag Growth International. The Motley Fool has a disclosure policy.

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