Last month was good for the Canadian equity markets, as the S&P/TSX Composite Index rose by 2.7%. Easing inflationary pressure and a cooling job market appear to have increased investors’ confidence, driving the equity market higher. Despite the rise in broader equity markets, the valuation of the following three companies looks attractive. Given their high-growth prospects and discounted stock prices, these companies could deliver superior returns over the next three years.
WELL Health Technologies
Supported by its solid quarterly earnings, WELL Health Technologies (TSX:WELL) has delivered impressive returns of around 95% this year, comfortably outperforming the broader equity markets. Despite the recent rally, the company trades at an attractive valuation, with its price-to-book and NTM (next 12 months) price-to-earnings multiples at 1.8 and 19.2, respectively.
Meanwhile, the telehealthcare market could continue to grow in the coming years amid the development of innovative products and increasing penetration of internet services. Also, the accessibility and convenience of telehealthcare services could boost their adoption. Amid the favourable environment, WELL Health is strengthening its footprint in Canada and the United States through strategic acquisitions. Further, it recently acquired a substantial stake in a German-based company that offers medical practice management software, which could act as a launch pad for the company to expand its footprint across Europe.
So, considering its solid performances, healthy growth prospects, and attractive valuation, I expect WELL Health to deliver higher returns over the next three years.
TC Energy (TSX:TRP) is another cheap stock to have in your portfolio, with its NTM price-to-earnings multiple at 13.4. The company’s management has stated that it would incur expenses of around $480 million to clean up the massive spillage at its Keystone Pipeline in December. The announcement appears to have weighed on the company’s stock price, which is down by 24.4% from its 52-week high.
However, the energy infrastructure developer operates a highly-regulated midstream energy business, thus making it immune to economic fluctuations. Supported by these stable financials, TRP stock has increased its dividends at a healthy CAGR (compounded annual growth rate) of 7% over the previous 23 years. Its quarterly dividend stands at a healthy 6.6%.
Meanwhile, TC Energy is advancing with its $34 billion secured growth projects, with the management expecting to develop around $6 billion worth of projects this year. These investments could grow the company’s financials, thus helping it maintain its dividend growth. So, I believe TC Energy would be an ideal buy.
My final pick would be Suncor Energy (TSX:SU), which is down over 20% from its June highs. The correction offers an excellent entry point for long-term investors, given the favourable environment and its growth initiatives.
Following the announcement of new production cuts by OPEC+ (Organization of the Petroleum Exporting Countries) and the expectation of rising demand, analysts project oil prices to remain elevated in the near-to-medium term. On the acquisition front, the company recently announced that it intends to acquire TotalEnergies’ Canadian operations for $5.5 billion. The acquisition could boost its bitumen production by 135,000 barrels per day while increasing its reserve by 2.1 billion barrels.
The acquisition could be accretive to Suncor Energy’s fund flows. So, the company’s management intends to raise its dividends by 10% after closing the deal. Considering its growth prospects and an NTM price-to-earnings multiple of 6.8, Suncor Energy could be an excellent buy right now.