Due to the ongoing Russia-Ukraine war, global energy shortages, and other macroeconomic events, stock prices are expected to remain volatile in the short term. Under such circumstances, buying undervalued stocks is a great way to increase returns. In terms of undervalued TSX stocks, there happen to be a number of great options to choose from. Thus, the question is, where should one start their search.
In this article, I’m going to highlight three undervalued TSX stocks that I think can outperform during this period of uncertainty. Notably, these are all companies I am considering owning as long-term holds.
Top undervalued TSX stocks: Alimentation Couche-Tard
Alimentation Couche-Tard (TSX: ATD) is an organization that licenses and operates convenience stores. It has markets all over North America, Asia, Europe, and several other parts of the globe. The company has a growth-by-acquisition model, which has proven to be very lucrative. One only needs to look at this company’s long-term chart to see how successful it’s been in consolidating a fragmented sector.
The company has been on the prowl for deals, closing a big deal earlier this year. The company signed a €3.1 billion deal with TotalEnergies SE to purchase 2,200 of its service stations. This includes a 100% acquisition of the latter’s assets in the Netherlands and Germany. It also involves a 60% stake in the French oil firm’s Belgium and Luxembourg holdings.
Assuming Couche-Tard can continue to roll up smaller gas station chains, and improve their respective ROIs, this is a stock that stands to benefit long-term investors from a growth standpoint. Given the fact that ATD stock currently trades at a multiple of only 17 times earnings, that’s a gamble long-term investors should consider making.
SmartCentres REIT
SmartCentres REIT (TSX: SRU.UN) has strategic real estate investments in 185 locations all over Canada. This includes 34.8 million square feet of income-generating properties, along with assets worth US$11.7 billion.
The real estate investment trust (REIT) has seen impressive performance in recent quarters, brushing off concerns around higher interest rates. SmartCentres reported 2% net rental income growth last year, supported by strong occupancy rates.
As economic conditions continue to ebb and flow, this situation may change. However, during previous crises, SmartCentres is one REIT that has actually held its own very well. Thus, for those who think Armageddon isn’t yet upon us, this stock’s 7% yield may be worth the gamble.
Paramount Resources
Paramount Resources (TSX: POU) is a petroleum and natural gas exploration company based in Canada. It has property assets amounting to 811,000 acres in British Columbia and 745,000 acres in West-Central Alberta.
The company’s rock-bottom multiple of less than seven times earnings is the main reason many investors consider this stock. Indeed, given where oil prices are right now (and they’ve actually been on the rise of late), there’s a lot to like about this company’s financial position.
Investors could essentially be paid off with the company’s cash flow in fewer than 10 years. That’s insanely cheap, and at these levels, I wouldn’t be surprised if private equity folks weren’t circling the company for a potential take-private deal.
This is an undervalued TSX stock that’s high on my radar as a potential buy. I’d suggest long-term investors at least take a look at this gem, while it’s still cheap.
