There are certainly many companies out there trading far below their value. But there are far fewer that are Canadian stocks considered undervalued. These would include Canadian stocks that are actually oversold, even in this poor market environment.
Today, I’m going to focus on three undervalued Canadian stocks investors may want to consider in May. These companies are due for a recovery sooner as opposed to later. And with a recession on the horizon, and markets turning downwards, it’s never been a better time to get a deal on these long-term holds.
Dye & Durham
Tech stocks did exceedingly well during the pandemic, until they didn’t. Dye & Durham (TSX: DND) was one of them. The tech stock surged as it offered subscription services for its cloud-based technology and software solutions. These came in as long-term contracts for large financial, legal, and even government institutions.
Yet Dye & Durham stock was one of the first to drop, as the company increased its subscription prices. It’s since had quarter after quarter of lower-than-anticipated earnings. The stock saw a decrease in year-over-year earnings across the board pretty much during its latest report. And this led to an even larger drop in share price.
However, given the company’s clientele, it’s quite likely Dye & Durham stock will recover soon and quickly. It’s a Canadian stock trading in oversold territory at a Relative Strength Index (RSI) of 24. Shares trade at 1.54 times book value, down 26% in the last year.
goeasy
Another Canadian stock that did well in the pandemic but recently dropped is goeasy (TSX: GSY). goeasy stock actually was doing quite well, even recently — that is, until the end of March when the federal government announced some changes.
After reporting record results from its earnings reports, mainly from loan originations, shares plummeted from the announcement. There will now be a cap of 35% for the annual percentage rate allowable on rate of interest. This could harm earnings for goeasy stock in the near future, as easyfinancial provides the largest portion of revenue.
Even so, it’s unlikely that the company will see a massive decline. It still offers competitive rates compared to those at banks and other financial institutions. Further, earnings continue to beat estimates again and again, with the stock considered a strong buy by analysts. Yet shares trade at an RSI of 29, down 28% in the last year and at a valuable 11.27 times earnings. Plus, you can grab a 4% dividend yield.
Verde AgriTech
It’s been a hard year for Verde AgriTech (TSX: NPK), with the crop nutrient company performing similarly to other peers in its field. The stock surged when Russia invaded Ukraine, with hopes sanctions would mean more price movement for those in the nutrient field.
Since that time, investors have taken their returns again and again. While this may not be a mistake entirely, there is certainly something to look forward to for investors today. The stock announced last year that it would seek to build a railway branch line in Brazil to transport up to 50 million tonnes of crop nutrients per year. This would be a huge win for Brazil and Verde stock alike.
Yet shares continue to trade poorly, even after record results. Revenue increased 190% year over year during the last quarter, with sales up 57%, and earnings before interest, taxes, depreciation and amortization up 271%. Profit increased an incredible 405% for the full year as well!
While shares are down 74% in the last year, trading at an RSI of 23 as of writing, this stock could certainly rebound. It now trades at just 7.4 times earnings at just $2.85 per share as of writing. Those shares could easily double in the near future and beyond.
