3 Absurdly Undervalued Stocks to Consider for April 2023

Canadian value investors can buy cheap stocks such as Viemed Healthcare and derive outsized gains in the next 12 months.

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You can always find undervalued stocks in the equity market. But a broader market selloff makes it much easier to go bottom fishing and buy shares of companies trading at a discount to their intrinsic value.

The stock market volatility in the last 15 months has dragged multiples of companies significantly lower, making them enticing bets right now. Here are three such absurdly undervalued stocks you can consider buying in April 2023.

Tidewater Renewables stock

A small-cap stock valued at $300 million, Tidewater Renewables (TSX:LCFS) has massive upside potential. The company is engaged in the production of renewable fuel in North America and aims to focus on generating low-carbon fuels such as renewable hydrogen and natural gas.

Tidewater ended 2022 with a net income of $26 million, adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $62.4 million, and a distributable cash flow of $38 million.

Tidewater expects its HDRD complex to scale production in the second half of 2023, ending the year with a utilization rate of almost 80%. It also executed a renewable diesel offtake agreement with an investment-grade partner to sell 50% of the production at HDRD through the end of 2024.

The company is forecast to increase sales from $76 million in 2022 to $434 million in 2024. Its adjusted earnings are estimated to almost triple from $0.74 per share to $2.22 per share in this period.

So, LCFS stock is priced at 0.7 times 2024 sales and 3.8 times forward earnings, which is very cheap. Analysts tracking the stock expect it to surge around 100% in the next 12 months.

Calian Group stock

Valued at a market cap of $750 million, Calian Group (TSX:CGY) offers business services and solutions in verticals such as health, learning, cybersecurity, and advanced technology. In the first quarter (Q1) of fiscal 2023 (ended in December), Calian Group increased sales by 14% year over year to $147.5 million, while free cash flow grew by 24% to $12 million.

The company attributed organic growth and recent acquisitions coupled with a strong performance in the Learning segment to its stellar results in Q1. It ended the quarter with $126 million in new signings and is forecast to increase sales by 12% to $652 million in fiscal 2023.

Priced at 1.1 times forward sales and 15.8 times earnings, CGY stock is priced at a discount of 30% to price target estimates.

Viemed Healthcare stock

The final undervalued stock on my list is Viemed Healthcare (TSX:VMD), which provides in-home durable medical equipment (DME) and post-acute respiratory healthcare services to patients in the U.S.

Valued at a market cap of $525 million, the healthcare company is forecast to increase sales from $187.5 million in 2022 to $252 million in 2024. Its earnings are forecast to rise from $0.22 per share to $0.68 per share in this period.

So, VMD stock is priced at 2.2 times forward sales and 20 times forward earnings, which is reasonable. The TSX stock is currently priced at a discount of 20%, given consensus price target estimates.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Calian Group. The Motley Fool has a disclosure policy.

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