The S&P/TSX Composite Index rose 53 points on Friday, May 19. Today, I want to zero in on two TSX stocks in the commodities space that look cheap right now. Moreover, we can take a quick gander at the broader economic environment and how it could impact metal prices going forward. Let’s dive in.
Source: Getty Images
How will the state of the global economy impact metal prices going forward?
The current debate over the United States debt ceiling has dominated chatter over the global economy over the past week. Historically, both parties have been able to come to the table to avert a catastrophe that could occur if the debt ceiling is not raised. The most intense battle over the debt ceiling occurred in 2011, under the watch of the Obama presidency.
There are concerns that the dramatically different monetary and economic climate, which includes a tight labour market and worryingly high inflation levels, could lead to a disastrous result. Former president and current Republican frontrunner Donald Trump suggested that his party should try to force a debt default.
Earlier this month, the World Bank predicted that metal prices would dip by 8% in 2023 and a further 3% in 2024. However, I’m still excited about these TSX stocks for the long haul.
Here’s a cheap TSX stock I’m stacking before the summer season
Stelco Holdings (TSX: STLC) is a Hamilton-based company that is engaged in the production and sale of steel products in Canada, the U.S., and around the world. Shares of this TSX stock have climbed 7.7% month over month as of close on May 19. The TSX stock is still up marginally so far in 2023. Canadian investors can see more of its recent performance with the price chart below.
This company released its first-quarter fiscal 2023 earnings on May 10. Stelco saw revenue drop 10% year over year to $687 million. Meanwhile, shipping volume climbed 17% from the first quarter of fiscal 2022 to 695,000 tons.
Stelco boasts a fantastic balance sheet at the time of this writing. Moreover, this TSX stock possesses a very favourable price-to-earnings (P/E) ratio of 4.3. It offers a quarterly dividend of $0.42 per share. That represents a 3.7% yield.
This undervalued TSX stock also boasts great income
Russel Metals (TSX: RUS) is a Toronto-based metal distribution company that operates in Canada and the United States. Its shares have climbed 24% so far in 2023. Meanwhile, this TSX stock has increased 15% in the year-over-year period.
The company unveiled the first batch of its fiscal 2023 results on May 8. Russel Metals reported total revenues of $1.18 billion — down from $1.33 billion in the first quarter of fiscal 2022. Moreover, earnings before interest, taxes, depreciation, and amortization came in at $116 million compared to $153 million in the prior year. Looking ahead, management expects the company to benefit from “favourable demand trends” and higher steel prices that spiked in the beginning of 2023.
Shares of this cheap TSX stock last had a very attractive P/E ratio of 6.5. Meanwhile, Russel Metals offers a quarterly dividend of $0.40 per share. That represents a super solid 4.4% yield.
