Last year’s inflationary wave and this year’s recession concerns have put a lid on stock prices. Nearly every sector has been battered, which means it’s a great time for long-term investors to go bargain hunting. Here are the top four TSX value stocks that look cheap right now.
Aritzia
Artizia (TSX: ATZ) stock took a beating this week after its latest earnings report. The company warned about rising costs due to inflation, which could impact its margins. It also lowered its sales growth expectations for the near term. The stock dropped 25% as a result.
However, Artizia is a long-term growth story with a robust track record and a solid plan for future expansion. The company expects to deliver $3.5-$3.8 billion in annual net revenue in 2027. Sales and EBITDA (earnings before interest, taxes, depreciation, and amortization) are expected to grow at 15-17% compounded over the next five years. Meanwhile, the stock is trading at a price-to-earnings ratio of just 21.
Even if 2023 is a difficult year, a rebound in growth over the long term could justify Aritzia’s current valuation.
Teck Resources
Base materials conglomerate Teck Resources (TSX:TECK) is an obvious candidate for a bargain hunter’s list. That’s because a recent acquisition offer made it clear that the company was undervalued. Glencore offered US$23 billion, or CA$31.25 billion, to acquire the company. The bid was rejected but now the company is worth just $30.7 billion — slightly below the offer price.
That means the world’s leading experts believe the firm is undervalued at current levels.
The company’s diverse revenue streams — ranging from steel-making coal to fertilizers — has put it in a strong position for the near future. Countries across the world are ramping up infrastructure investments and energy deployments, which means Teck Resources has plenty of room for growth ahead.
The stock is currently trading at just 18 times earnings. Keep an eye on it.
WELL Health
At first glance, WELL Health Technologies (TSX: WELL) doesn’t necessarily look like a bargain. The stock is up 117% over the past six months and is currently trading at a price-to-earnings ratio of 924.
However, those metrics are deceptive, because WELL Health has only recently broken even and turned profitable. A better metric is revenue, which is expected to be $665 million to $685 million in 2023. Meanwhile, the company is worth just $1.3 billion, which means the stock is trading at a price-to-revenue ratio of 1.89!
That’s incredibly undervalued for a software stock. The average software company trades at eight to 10 times revenue, simply because the margins are robust and revenue is recurring. I expect WELL Health to hit that level in the near future as profitability ramps up. Keep an eye on this underrated gem.
Cargojet
Cargojet (TSX: CJT) is probably one of the most neglected stocks on the market. The stock price is down 33% in the last year, which means its trading at a 52-week low. However, falling oil prices should alleviate some cost concerns and its revenue seems to be stable. Cargojet is trading at 10 times earnings and is a prime candidate for your bargain-hunting watch list this year.
