It has been a topsy-turvy year for TSX stocks. Frankly, it is hard to tell if stocks are cheap or pricey. However, it really depends on what segment or market you are looking at.
Oil stocks have collapsed in recent months and look incredibly cheap. However, given how cyclical these stocks can be, one has to ask if they are cheap for a reason.
In contrast, tech stocks have been gaining a strong bid after a horrendous 2022. In fact, some of Canada’s best-quality tech stocks have recovered all their losses last year and are trading near all-time highs.
The point is, if you want to find value, you have to look and be picky. Just because something is cheap doesn’t mean it is a good investment. If you are a long-term investor, a company needs to have a compelling story, strong business fundamentals, and an attractive or fair valuation.
If you are looking for some undervalued stocks that could have long-term upside, here are two to have on your radar.
BRP: A TSX growth stock at a cheap value
BRP (TSX: DOO) stock is up 3% year to date and 17.8% over the past year. Over the past five years, this TSX stock has delivered a pretty tasty 120% return. Yet the stock remains an attractive bargain.
BRP is a leader in the recreational, off-road, and marine vehicle space. It has a quickly growing portfolio of highly innovative products.
This TSX stock just reported earnings yesterday. For 2022, it grew revenues by 31% to $10 billion, a new record. It grew adjusted net earnings per share by 21% to $12.05. The company outperformed both its guidance and most analyst expectations. It also bought back $365 million of stock in the year and just raised its dividend 12.5% to $0.18 per share.
Despite all the good metrics, the stock was down 4.6%. It only trades for 8.4 times earnings. Regardless of drastically gaining market share in 2022, it trades at a material discount to other competitors. While the market is worried about a recession, BRP continues to innovate and add new market verticals.
This TSX stock generates a lot of cash, and it has a decent balance sheet. While there is economic uncertainty, the stock might lag, but it could have a strong recovery out of any downturn.
TELUS: Just a solid stock for income
TELUS (TSX: T) is a great TSX stock if you are looking for income and some modest growth. Not only does TELUS have a great brand as a leading telecommunications business, but it is also a leader of digital services across Canada.
In 2022, TELUS grew its revenues by over 6% and adjusted earnings per share by 9%. It also increased its dividend by over 7% during the year. The company has invested heavily in fibre optic infrastructure, which is expected to yield outsized free cash flow in the coming years.
At $27 per share, TELUS stock is down 15% over the past year. It trades with an enterprise value-to-earnings before interest, tax, depreciation, and amortization ratio of eight, which is below its three-year mean. Likewise, it is trading with an attractive 5.15% dividend yield.
I wouldn’t call this TSX stock a mega bargain, but it does look attractive for those looking for safe and growing dividend income.
