3 Stocks That Are Cheap Today for All the Wrong Reasons

I’m looking to cheap stocks like Dye & Durham (TSX:DND) and others as the TSX looks stagnant in the middle of May.

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The S&P/TSX Composite Index has stagnated somewhat since its momentum peaked after the midway point in April. Investors who live by the “sell in May and go away” adage might be patting themselves on the back right now. However, now is a good time to seek out discounts on the Canadian market. Today, I want to zero in on three stocks that look undervalued as we look to the second half of May. Let’s jump in.

This health stock looks undervalued in the middle of May

Bausch Health (TSX:BHC) is a Laval-based diversified pharmaceutical company. Shares of this healthcare stock have dropped 24% month over month as of close on May 12. That has pushed the stock into negative territory in the year-to-date period.

This company released its first-quarter (Q1) fiscal 2023 earnings on May 4. Bausch Health delivered total revenues of $1.94 billion — up from $1.92 billion in Q1 2022. The company’s large Salix segment delivered organic growth of 7% to $464 million, powered by drugs like Xifaxan, Relistor, and Trulance. For the full year, Bausch Health is projecting revenues between $8.35 billion and $8.55 billion. Moreover, it expects full-year adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) between $3 billion and $3.15 billion.

Shares of Bausch Health are trading in very favourable value territory compared to its industry peers. Moreover, Bausch is on track for very strong earnings growth going forward. This is a cheap stock to consider before the spring season comes to an end.

Here’s a stock that just sent off a big buy signal

Dye & Durham (TSX:DND) is a Toronto-based company that provides cloud-based software and technology for legal firms, financial service institutions, and government organizations in Canada, Australia, Ireland, and the United Kingdom. The stock has jumped 7.1% over the past month as of close on May 12. That pushed its shares into the black for the year-to-date period.

Investors got to see Dye & Durham’s Q3 fiscal 2023 results on May 10. Contracted annual recurring revenue more than doubled to 18% of total revenue. However, overall revenue contracted 15% to $104 million. For Q4, the company is projecting revenue between $115 million and $120 million and adjusted EBITDA between $65 million and $70 million.

The Relative Strength Index (RSI) is a technical indicator that measures the price momentum of a given security. This cheap stock spent much of April and the beginning of May in technically oversold territory. It has since rebounded, but the stock is still trading in attractive value territory over its competitors.

Why I’m excited about this micro-cap for the future

AirBoss (TSX:BOS) is the third cheap stock I’d look to snatch up in the final stretch of the 2023 spring season. This Newmarket-based company is engaged in the development, manufacture, and marketing of rubber-based products in Canada, the United States, and around the world. Its shares have dipped 2.5% month over month. Meanwhile, the micro-cap stock is down 3.5% so far in 2023.

In Q1 FY2023, AirBoss saw consolidated net sales drop 19% year over year to $117,076.  Consolidated gross profit also suffered a sharp dip compared to Q1 of fiscal 2022. However, I’m still excited about AirBoss’s exposure to the defence space. Its AirBoss Defense Group segment posted a net sales decline of 55% compared to the previous year. However, this was primarily due to a substantial HHS nitrile patient examination glove contract in Q1 of fiscal 2022.

Shares of AirBoss are trading in favourable value territory compared to its industry peers. Despite the slow start, AirBoss is still geared up for strong earnings growth in the quarters to come. This is a great buy-low opportunity in the spring of 2023.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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