While TSX stocks have been strong over the summer, recent momentum appears to be reversing. Frankly, that is nothing new. The autumn months are often weaker, as the market seems to reset in preparation for the winter.
Certainly, valuations have risen over the past few months. Yet there are still some attractive bargains out there. You may need to be very patient for the thesis of these stocks to work out, but here are two incredibly cheap stocks to buy with $500 today.
A growth stock at a very low valuation
With a market cap of $300 million, Propel Holdings (TSX: PRL) is not a stock many Canadians are familiar with. There are a few reasons for this. First, it is a small company. Second, it has only been a public company since its initial public offering (IPO) in October of 2021. Third, until recently, its operations have largely been in the U.S.
Despite this, this stock is on the precipice of some big things. Propel provides consumer loans through a mix of bank partnerships and online lending platforms. It has proprietary AI (artificial intelligence) technology that utilizes a diverse array of data points to better underwrite the loans it grants. This gives it a unique competitive advantage.
The company recently commenced a partnership with Pathward (a Banking as a Service platform), and it also expanded its lending platform into Canada (called Fora). Despite worries about the economy, all these ventures appear to be paying off.
In its recent second quarter, it grew its loan and advance balance by 53% to $273 million. Revenues increased 33% to $71.7 million, and net income increased by 183% to $5.7 million. Net income per share increased 174% to $0.15 per share.
Despite demonstrating both growth and profitability since its IPO, this stock only trades for six times 2023 expected earnings. This stock also earns a 4.3% dividend yield. While Propel operates in a riskier segment, it has appeared to navigate it very well. You are not paying an extreme price for this stock, which helps provide a margin of safety for a longer-term investment.
A market leader at an attractive price
Another cheap stock to consider buying with $500 is BRP (TSX: DOO). BRP owns iconic brands like Sea-Doo, Ski-Doo, and Can-Am. There are only a handful of competitors across its product range, and BRP has been gaining market share in recent years.
BRP has been innovating new product categories that have gained strong traction. Whether it be the Ski-Doo pontoon boat or its recently introduced one-of-a-kind Rotax boat engine, BRP’s competitive advantage is its innovation.
Across its product portfolio, BRP cross utilizes engines and components. As a result, it operates with significant manufacturing efficiency and earns industry-leading profit margins. The company has grown earnings per share by a compounded rate of 33% over the past five years.
BRP has also been buying back its own stock aggressively. Since 2017, it has lowered its share count by nearly 30%. That means as earnings go up, earnings-per-share growth only accelerates more.
With a price-to-earnings ratio of 8.5, this stock trades near its lowest multiple in five years. For a great long-term business at a very fair price, BRP stock is another interesting name to buy with $500 today.
