So far, the economy has turned out better than many feared in 2023. Inflation has moderated from the highs, raising expectations of a pause on interest rate hikes. Further, investors’ appetite for risk has increased, as reflected by the strong rebound in several Canadian stocks.
Despite the recent recovery rally, shares of a few fundamentally strong Canadian corporations are offering significant value near the current levels and are trading at a discounted valuation. So, for investors looking for value stocks, here are my three top picks.
WELL Health
Shares of the digital healthcare company WELL Health (TSX: WELL) recovered swiftly in 2023, rising about 61% year to date. The recovery in WELL Health stock reflects the company’s strong financial performance despite economic reopening and macro uncertainty.
While this tech stock has marked considerable recovery, it is still trading extremely cheap, providing excellent value to long-term investors. The stock is trading at the NTM (next 12-month) enterprise value-to-sales multiple of 1.9, significantly lower than its historical trading average of about 5.2, making it too cheap to ignore near the current levels.
WELL Health continues to gain from increasing omnichannel patient visits, which drives its organic sales. Furthermore, the acceleration in its high-margin virtual services business bodes well for earnings growth. In addition, its investments in Artificial Intelligence and new product launches will support its growth. Besides organic growth, the company will also benefit from its focus on accretive acquisitions, which will drive its revenues and expand its operations.
WELL Health’s ability to grow rapidly, its profitable business, and its low valuation make it an attractive value stock.
goeasy
Trading at an NTM price-to-earnings multiple of nine and offering a double-digit EPS (earnings per share) growth, goeasy (TSX: GSY) is an attractive value stock near the current levels. It provides loans to subprime lenders and has grown its earnings at an average annualized growth rate of 32.9% in the past five years.
Despite macro uncertainty, the momentum in goeasy’s business has been sustained, led by higher loan originations. Further, these originations were of high quality, which supported its credit performance. Higher loan growth, improved product mix, and stable credit and payments performance position goeasy well to deliver solid earnings in the coming quarters.
Further, its broad product range, omnichannel distribution, and proactive credit and underwriting enhancements augur well for growth.
Besides offering significant value and growth, goeasy is poised to enhance its shareholders’ returns through higher dividend payouts. It is a Dividend Aristocrat and provides a yield of over 3%.
Lightspeed
With an NTM enterprise value-to-sales multiple of 2.1, Lightspeed (TSX: LSPD) is another attractive stock offering significant value. While the stock is trading cheap, it continues to deliver strong sales growth led by the growing adoption of the company’s payment offerings.
The ongoing digital shift will drive demand for Lightspeed’s products. Further, its focus on high-value customers will likely drive its multiple module adoption and average revenues per user. At the same time, it will reduce its customer churn rate.
Lightspeed is heading towards achieving profitability, which is encouraging. Meanwhile, its focus on accretive acquisitions will accelerate its growth rate. Overall, its solid fundamentals, good growth opportunities, and low valuation make it a solid long-term pick.
