While equity markets have staged a recovery year to date, the comeback has primarily been driven by technology stocks. So, you can still go bottom-fishing and buy quality stocks across sectors on the dip. But not every beaten-down TSX stock is a buy.
Here, we look at two TSX stocks investors can buy this month and one stock, which you need should avoid at all costs.
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TSX stock to buy #1
Neighbourly Pharmacy (TSX:NBLY) owns and operates one of Canada’s largest networks of community pharmacies. These outlets are generally located in smaller and underserved markets, shielding the company from intense competition.
Neighbourly currently owns over 6,500 pharmacies in Canada, allowing it to report $671 million in sales in the last 12 months.
While same-store sales were up 4% year over year in the fiscal third quarter (Q3) of 2023 (ended in December), total revenue surged 90.6% to $265.3 million. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) almost doubled to $28.5 million on the back of outlet acquisitions. Its network of pharmacies is now at 284 locations, following the integration of eight outlets in Q3.
Analysts expect Neighbourly Pharmacy to report sales of $951 million in fiscal 2024. Neighbourly Pharmacy is forecast to end the next fiscal year with adjusted earnings of $0.76 per share compared to a loss of $2.57 per share in 2022.
Priced at one times forward sales and 27 times forward earnings, NBLY stock is trading at a discount of 48% to consensus price target estimates.
TSX stock to buy #2
Another TSX stock investors can buy today is Well Health (TSX:WELL), a company that operates in the health-tech space. WELL stock has already returned over 4,000% to shareholders since its initial public offering in April 2016. However, down 50% from all-time highs, it is an attractive buy for growth and value investors.
Valued at a market cap of $1 billion, Well Health is forecast to increase sales from $569 million in 2022 to $700 million in 2023.
The company increased sales by 34% year over year to $169.4 million in Q1 of 2023, which was a quarterly record for Well Health. While most growth stocks in the health-tech space remain unprofitable, Well Health reported a free cash flow of almost $11 million in the quarter.
Analysts remain bullish on WELL stock and expect shares to surge over 80% in the next 12 months.
TSX stock to sell
One TSX stock that is similar to a dumpster fire is Aurora Cannabis (TSX:ACB). Down 99% from all-time highs, ACB stock remains a high-risk bet, despite its free fall.
Unlike its cannabis peers south of the border, Aurora Cannabis continues to report massive losses, despite scaling down operations and reducing employee headcount significantly.
In recent months, Aurora Cannabis has focused on selling medical marijuana products, which enjoy higher profit margins. But in the last 12 months, it has reported a negative gross profit of $28 million and an operating loss of $256 million.
The company ended the December quarter with just $259 million in cash, which suggests it will have to raise equity capital again, resulting in another round of shareholder dilution. In short, ACB stock is wrestling with structural issues, making it a very risky investment right now.
