2 Top Canadian Value Stocks in May 2023

Unearth the top Canadian value stocks in May 2023! Find hidden gems with potential for significant growth and maximize your investment returns.

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Stocks that trade below their intrinsic valuation are typically considered value stocks. With the stock market down 8% below all-time highs, investors can go bottom fishing and identify several value stocks right now.

Here are two top Canadian value stocks you can consider buying in May 2023.

EQB Inc. stock

A company operating in the financial services space, EQB Inc. (TSX:EQB) has two primary business segments that include personal banking and commercial banking.

Its personal banking business serves close to 500,000 Canadians with loans under management totaling $32 billion. Here, it offers products such as mortgage loans, home equity lines of credit, insurance lending, and reverse mortgages. The loans under management for its commercial business are close to $26 billion.

In recent months, a difficult macro-environment has dragged shares of EQB lower by 25% from all-time highs, valuing the company at a market cap of $2.3 billion.

Despite a challenging macro environment, EQB reported an adjusted net income of $101.7 million in the first quarter (Q1) of 2023, which was a quarterly record for the company. Comparatively, its revenue soared 40% to $264.6 million, driven by lending growth, net interest margin expansion, and higher non-interest revenue.

EQB stock has returned 281% to shareholders in the last 10 years, after adjusting for dividends, while the TSX index is up just 132% in this period. The Canadian bank stock remains a compelling bet, given it is priced at six times forward earnings, which is very cheap.

Analysts, in fact, expect EQB stock to increase adjusted earnings by 19.5% annually in the next five years, which should support dividend increases too.

EQB stock offers investors a dividend of $1.40 per share, translating to a yield of 2.4%. These payouts have increased by 13.8% annually in the last 15 years. Analysts remain bullish on EQB stock and expect it to gain 30% in the next 12 months.

Alimentation Couche-Tard

A TSX giant, Alimentation Couche-Tard (TSX:ATD) is valued at a market of $66 billion. ATD stock has surged by a staggering 5,800% in the last 20 years, creating massive wealth for long-term shareholders.

The retail heavyweight opened its first store in Quebec back in 1980 and has since expanded its presence at a rapid clip. It entered the U.S. in 2001 and gained traction in Europe in 2012. ATD continues to enter new markets, fueling its top-line growth and margin expansion.

With a coast-to-coast presence in Canada, ATD’s retail outlets are already located in 47 of the 50 states south of the border. It ended fiscal Q3 of 2023 with more than 14,000 stores in operation in 24 countries.

The company has a strong track record of successful integrations and post-merger synergies. It continues to look for accretive acquisitions and aims to grow in regions such as the U.S. and Asia.

ATD’s robust cash flow generation has supported capital expenditures and growth plans. It has also allowed ATD to increase dividends by 25% annually in the last decade.

ATD stock is priced at 17 times forward earnings, which is quite reasonable for a growth stock. Analysts expect shares of this blue-chip TSX company to gain over 10% in the next 12 months.

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 has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends EQB. The Motley Fool has a disclosure policy.

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