The stock market has only two cycles. One comes after the other, and then the cycle continues. Investors love a bull market, because stock prices consistently rise, and a bear market is the opposite (prices fall 20% or more). Bargain hunters capitalize during downturns to reap the rewards when the market recovers.
As of this writing, the TSX is 2,320.77 points (-10.6%) lower than a year ago. However, a bull run could be coming soon, given that the Index is now up 1.41% year to date. You can load up on undervalued stocks before Canadian stocks turn the corner.
Cenovus Energy (TSX: CVE), Aritzia (TSX: ATZ), and Neighbourly Pharmacy (TSX: NBLY) are buying opportunities today. These stocks can deliver substantial capital growth in a rising market.
Fortified balance sheet
Cenovus Energy reported solid operational and financial performance in 2022. The $43.43 billion integrated energy company operates in Canada and the Asia Pacific Region for its oil and natural gas production. Its upgrading, refining, and marketing operations are in the home country and the United States.
Last year, the cash from operating activities and free funds flow rose 93% and 55% to $11.4 billion and $7.27 billion versus 2021. The net earnings soared 999% year over year to $6.45 billion. Its president and chief executive officer (CEO), Alex Pourbaix, said besides fortifying the balance sheet, Cenovus reduced its net debt by more than 50%.
Pourbaix added, “We delivered substantial shareholder returns and executed strategic and opportunistic acquisitions and divestitures.” At $22.77 per share (-12.94% year to date), CVE pays a 1.93% dividend. Market analysts’ 12-month average price target is $32.84 (+44.2%).
Strong momentum
Market analysts covering Aritzia maintains a bullish sentiment. Based on their average price target, the stock’s return potential in 12 months is 57.1%. At $39.20 per share, the year-to-date loss is 17.99%. The $4.32 billion design house boasts an innovative global platform and sells apparel and accessories for women.
Management has yet to report the full-year fiscal 2023 financial results, although Aritzia had tremendous momentum and a record-breaking third quarter. In the three months that ended November 27, 2022, the net revenue of $624.6 million was the highest of any quarter in Aritzia’s history. The net income rose 8.9% year over year to $70.7 million.
Jennifer Wong, Aritzia’s CEO, said, “Looking ahead, we will continue to strategically invest in the infrastructure that will allow us to execute our long-term growth plan and beyond.”
Dark horse
Neighbourly Pharmacy is a dark horse with a multi-bagger potential. The $983.1 million company owns Canada’s fastest-growing network of independent pharmacies. At $22.10, the healthcare stock is down 5.33% year to date. However, market analysts have a high price target of $36 (+62.9%) in one year.
In the third quarter of fiscal 2023 (three months that ended December 31, 2022), revenue climbed 90.6% to $265.3 million versus the third quarter of fiscal 2022. Its former CEO, Chris Gardner, said the results reflect the strength and resiliency of the business. Skip Bourdo, the new CEO, commits to leading Neighbourly in the next phase of growth and the drive profitability.
Potential breakouts
Bear markets are expected but tend to be shorter in duration. It’s also an excellent time to hoard undervalued stocks that are well positioned to break out, as the market recovers from its loss in 2022.
