On Wednesday, the United States Labor Department announced that the consumer price index rose 4.9% compared to the previous year, which was lower than analysts’ expectation of 5%. Notably, it was the lowest increase in two years. So, with inflation cooling down, I believe the Federal Reserve could ease its monetary tightening initiatives, thus driving equity markets higher.
Amid improving market conditions, here are three TSX value stocks that you can buy to earn superior returns over the next three years.
goeasy
On Wednesday, goeasy (TSX:GSY) reported a solid first-quarter performance, with loan originations of $616 million, thus expanding its loan portfolio to $3 billion. The strong performance across its entire product range and acquisition channels drove its loan originations. Further, the company’s net charge-off rate stood at 8.9%, within its targeted limit of 8-10% and slightly higher than 8.8% in the previous year’s quarter.
Supported by these solid operational metrics, goeasy’s revenue and adjusted EPS grew by 24% and 14%, respectively. However, with the Canadian government stating its intent to lower the maximum allowable interest rate to 35% on an annualized percentage rate, the company’s management has announced a new three-year guidance. The guidance projects its loan portfolio to grow 70% from its current levels to $5.1 billion by the end of 2025 while generating an annual return on equity of over 36%.
goeasy’s solid first-quarter performance and the management’s optimistic three-year guidance appear to have increased investors’ confidence, driving its stock higher. The company’s stock price has increased by over 12.5% since reporting its first-quarter earnings. Despite the rise, it still trades around 50% lower than its 2021 highs. Also, its NTM (next 12 months) price-to-earnings stands at 7.6, making it an attractive buy.
WELL Health Technologies
Today, WELL Health Technologies (TSX:WELL) reported a solid first-quarter performance. The company’s revenue grew by 34% amid strong organic growth. It had 1.4 million patient interactions during the quarter, with an annualized rate of 5.6 million patient interactions. Supported by its topline growth, the company’s adjusted net income increased by 58.4%. It also generated an adjusted free cash flow of $10.8 million for the quarter.
After reporting its Q1 earnings, WELL Health’s management has raised its 2023 revenue guidance to $690–$710 million while maintaining its adjusted EBITDA guidance of 10% growth. Meanwhile, the company has witnessed solid buying this year, with its stock price rising by 86%. Despite the surge, it trades at a 43% discount from its all-time high. Its valuation also looks cheap, with its NTM price-to-sales multiple at 1.8, thus making it an attractive buy.
Suncor Energy
Following the Federal Reserve raising its benchmark interest rates by 25 basis points to 5–5.25%, the fear of an increase in contagion risk in the banking industry and a recession has dragged oil prices down. Brent crude has lost around 15% from last month’s highs. The decline in oil prices has also dragged down the stock prices of oil-producing companies, including Suncor Energy (TSX:SU), which has lost over 13% compared to its April highs.
Despite recession fears, analysts are bullish on oil, with a few projecting Brent crude to cross US$100/barrel by next year. Supply concerns amid production cuts by OPEC+ (Organization of the Petroleum Exporting Countries) and rising oil demand could boost oil prices, benefitting Suncor Energy. Further, the company is working on acquiring Canadian operations from TotalEnergies, which could increase its production. So, higher oil prices, increased production, and improved operational execution could boost its financials in the coming quarters. Besides, the company’s NTM price-to-earnings multiple of 6.9 and dividend yield of 5.35% makes it an attractive buy.
