The Canadian stock market has several stocks trading under $20. But before investing in these stocks, investors should take caution, as there could be solid reasons behind their lower prices. Nonetheless, investors should look for stocks that are not only cheap but have proven business models and multiple long-term growth catalysts.
Against this background, I’ll discuss three Canadian stocks in this article that are trading under $20 with the potential to deliver multi-fold returns in the long term.
WELL Health
WELL Health (TSX: WELL) stock marked a steep recovery in 2023, with its shares gaining about 66% year to date. It’s worth highlighting that WELL Health remained immune to macro and geopolitical headwinds in 2022 and delivered exceptional sales. This reflects the strength of its business model. Further, the company turned profitable, which supported the rally in its share price.
While WELL stock has recovered quite a lot, it is still trading at a forward enterprise value-to-sales multiple of 2.2, which is significantly lower than its historical average. Furthermore, its predictable revenues, positive cash flow, and omnichannel business model provide a solid foundation for long-term growth.
This under-$20 stock is poised to benefit from steady organic growth. WELL Health is set to gain from the ongoing momentum in its omnichannel patient visits. Moreover, its Virtual Services offering (a high-margin product) is growing swiftly, which bodes well for future sales and earnings growth.
Overall, WELL Health’s low valuation and multiple growth catalysts make it an excellent long-term pick.
StorageVault Canada
Shares of StorageVault Canada (TSX: SVI) have doubled in three years. The company that owns and manages storage locations is witnessing stellar demand for its offerings due to a growing population, increasing e-commerce penetration, and the need for last-mile logistics solutions.
Its revenue and net operating income registered double-digit growth in 2022. Further, its adjusted funds from operations jumped 27.9%.
This under-$20 mid-cap stock is poised to benefit from ongoing strength in demand and revenue optimization through higher rent per square. Further, the expansion of its stores (increase in rentable space) will likely support its growth. In addition, its short-period rentals (primarily weekly or monthly) enable it to manage pricing and demand well and counter inflation. Also, its focus on strategic acquisitions accelerates its growth.
Investors looking for a fundamentally strong stock with an attractive valuation could consider adding StorageVault near the current levels.
Absolute Software
Absolute Software (TSX: ABST) stock has witnessed a pullback, providing a solid entry point for long-term investors. The firm offers endpoint security solutions and is poised to gain from the ongoing digital transformation. Further, the increase in cybersecurity threats will likely fuel demand for its products and solutions.
The company is performing well, with its cloud and subscription services revenues increasing at a healthy pace. Further, its annual recurring revenues and adjusted earnings before interest, taxes, depreciation, and amortization have consistently grown at double-digit rate growth in the past several years.
Overall, the secular sector’s tailwinds, growing customer base, geographical expansion, new products, and cross-selling opportunities will likely drive its stock price.
