After more than a year of a worsening economic environment and consistently rising interest rates, numerous Canadian stocks are trading at bargain basement prices and have massive potential in the next bull market.
When stocks across the board sell off, it doesn’t mean every stock that’s cheap is high-quality. But it does mean that there are certainly some top-notch stocks trading well undervalued.
This market environment won’t last forever, though. So it’s essential to use this opportunity to find the highest-quality stocks on the market that you can buy at a significant discount today.
So if you’ve got some cash you’re looking to put to work for you today, here are three bargain basement stocks that could rally significantly in a bull market, in addition to offering long-term growth potential.
A rapidly recovering TSX stock
One of the best bargain basement stocks in Canada to buy now while it’s still cheap is K-Bro Linen (TSX: KBL), the laundry and linen services company with operations in Canada and the U.K.
K-Bro Linen predominantly provides laundry and linen services to the healthcare and hospitality sectors. Therefore, while it saw a slight uptick in revenue from the healthcare sector over the last few years through the pandemic, it endured a massive hit to its operations in the hospitality sector.
With the pandemic now in the past, though, K-Bro has been recovering rapidly and now looks unbelievably cheap.
In its most recent quarter, for example, its revenue increased by 14% year over year due in large part to its hospitality sector, which saw sales jump over 36% from the same quarter last year. Furthermore, its earnings before interest, taxes, depreciation and amortization (EBITDA) were up an unbelievable 50% year over year.
Therefore, while KBL still trades cheaply and at a forward enterprise value (EV)-to-EBITDA ratio of just 8.7 times, below its 10-year average of 11.3 times, it’s certainly one of the best bargain basement stocks to buy now.
An impressive defensive growth stock trading at bargain basement prices
Another impressive and undervalued stock to buy now and hold for the long haul is Neighbourly Pharmacy (TSX: NBLY).
Neighbourly Pharmacy is an intriguing business that continues to grow by acquisition, buying up small, individual-owned pharmacies in rural and suburban areas. This is a strategy with a tonne of potential as Neighbourly continues to acquire more locations and scale its costs.
Furthermore, pharmacies are defensive businesses, so Neighbourly can help protect your capital in the near term while offering plenty of growth potential over the longer term.
For example, analysts estimate Neighbourly’s sales will increase by over 22% this year and more than 15% next year.
Therefore, while Neighbourly trades near the bottom of its 52-week range, it’s one of the best bargain basement stocks to buy now. The six analysts who cover Neighbourly, for example, have an average target price of $23.50, a more than 30% premium to where Neighbourly trades today.
An intriguing death care services stock
Lastly, another stock that’s seen impressive growth over the years due in large part to a growth-by-acquisition strategy is Park Lawn (TSX: PLC).
Park Lawn owns assets such as cemeteries, crematoria, funeral homes, chapels, planning offices and more all across North America.
This is a business that is quite defensive but also offers significant long-term growth potential both as it makes more acquisitions and as the population in North America continues to age.
In just the last three years, its sales have climbed from just $173 million in 2019 to more than $326 million last year. That’s an increase of more than 88% in just three short years. Plus, for 2023, it’s expected to see another 10% increase in sales.
So Park Lawn is an ideal stock to own in this environment. It’s considerably defensive, trades cheaply, and has a long runway of growth.
Furthermore, the stock’s average analyst target price is $34, a more than 40% premium to where Park Lawn trades today. Therefore, while it continues to trade at bargain basement prices, it’s one of the best Canadian stocks to buy now before the next bull market.
