The persistently high inflation and rising interest rate environment has led to a painful decline in Canadian stocks. However, this correction in TSX stocks provides an exceptional opportunity for investors to buy fundamentally strong stocks significantly below their peaks. If you are sitting on cash, consider investing it in two TSX stocks. Both are great buys today.
However, investors should note that stocks could remain volatile in the short term owing to economic uncertainty. Let’s begin.
With technology stocks losing substantial value over the past one-and-a-half years, most of them are trading at a significant discount. One such lucrative bet is Lightspeed (TSX:LSPD) near the current levels. The company provides tools that enable omnichannel commerce. While the near-term macro headwinds continue to limit the upside in Lightspeed stock, the ongoing digital transformation offers a solid base for long-term growth.
What is especially attractive is that Lightspeed is trading at a next 12-month enterprise value-to-sales ratio of 1.6, which is incredibly cheap. This compares favourably to its historical average multiple of about 15. While Lightspeed is trading extremely cheap, it continues to grow at a healthy pace, and the company is focusing on achieving profitability, which makes it a buy near the current levels.
Lightspeed is in a strong position to benefit from the structural shift in selling models towards omnichannel platforms, which will drive demand for its products. Further, as more and more businesses are investing in modernizing their POS (point-of-sale) platform, Lightspeed will likely witness higher demand and deliver increased sales.
The company expects to benefit from its focus on customers with higher GTV (gross transaction volume). These customers have the potential to adopt its multiple modules, have a lower churn rate, and produce higher average revenue per user. Overall, this is likely to boost its margins and help the company to achieve profitability.
Also, Lightspeed is streamlining its business and plans to offer only two core products by targeting retail and restaurants. This will improve its go-to-market approach and support its margins.
Overall, Lightspeed is well-positioned to capitalize on the ongoing digital shift and has strong potential for growth. While the pressure on consumers’ discretionary spending could impact its short-term financials, its low valuation and multiple growth catalysts support my long-term bull case.
goeasy (TSX:GSY) stock is one of my top bets to beat the TSX in the long term. The lender offers loans to non-prime borrowers and has been growing briskly. However, goeasy stock has witnessed a pullback on fears of an economic slowdown, providing a solid opportunity to invest in this high-growth company near the current price levels.
Notably, goeasy stock has a market cap of close to $2 billion, while it’s trading at a forward price-to-earnings ratio of 7.8, lower than its historical average of 11.5. Besides trading cheap, goeasy offers a lucrative dividend. It has been paying dividends for 19 consecutive years. Further, it increased its annual dividend in the past nine years.
The company has generated multi-fold returns for its shareholders in the past decade. Meanwhile, its promising growth prospects imply that it could deliver stellar returns in the coming years.
goeasy sees its sales growing at a double-digit rate over the next three years. Meanwhile, operating leverage and solid credit quality will likely cushion its earnings. Along with capital gains, investors can partake in its decent dividend yield of 3.34% by investing in this stock.