3 Top TSX Stocks to Buy for September 2023

Undervalued TSX stocks such as Pet Valu are trading at a massive discount to analyst price target estimates.

Aditya Raghunath

Aditya Raghunath joined the Motley Fool Canada team in 2019 and has close to seven years of experience in covering publicly-listed companies. With a post-graduate degree in finance, Aditya aims to educate and engage Canadians by writing extensively about growth, dividend, and value stocks. If you are considering investing in the stock market, he recommends reading The Intelligent Investor by Benjamin Graham before taking the plunge.

Published August 28, 2023 12:00 pm EDT

Buying and holding quality TSX stocks can help you derive outsized gains over time. Despite the volatility associated with equities, it’s impossible to time the market bottom, making every major dip a compelling buying opportunity.

Here we look at three such undervalued Canadian stocks you can consider buying for September 2023.

Brookfield Infrastructure Partners stock

Brookfield Infrastructure Partners (TSX: BIP.UN) is a popular dividend stock on the TSX. Its resilient business model allows the company to generate stable cash flows. For instance, 70% of its funds from operations (FFO) are tied to long-term contracts or regulated-rate structures. So, BIP is significantly immune from volume or price risks.

It currently offers shareholders a tasty dividend yield of 4.7%, and analysts expect adjusted earnings to grow from $0.19 per share in 2022 to $1.12 per share in 2024. With a payout ratio of between 60% and 70%, BIP’s dividends are sustainable while allowing it to use cash flows to fund its expansion plans.

Armed with an investment-grade balance sheet, BIP has a BBB+ bond rating. Moreover, its long-term fixed-rate debt has an average maturity of seven years, insulating the company from rising interest rates.

BIP stock also trades at a discount of 40% to consensus price target estimates.

Pet Valu stock

The largest pet retailer in Canada, Pet Valu (TSX: PET) is valued at a market cap of $1.8 billion. It has increased sales from $573 million in 2019 to $952 million in 2022. PET stock listed on the TSX two years back and trades 41% below all-time highs, allowing you to buy a quality growth stock at a lower multiple.

In Q2 2023, Pet Valu experienced double-digit growth in consumables such as pet food and cat litter. This growing demand indicates its curated offering of premium products is resonating with Canadian pet owners.

Due to a recent shift in consumer demand, Pet Valu aims to prioritize key projects and investments while maintaining profit margins.

Analysts tracking PET stock expect sales to rise by 12% to $1.1 billion in 2023 and 8.5% to $1.2 billion in 2024. Comparatively, adjusted earnings are forecast to rise from $1.6 per share in 2022 to $1.84 per share in 2024. Priced at 13.9 times 2024 earnings, Pet Valu stock trades at a discount of 40% to average price target estimates.

Neighbourly Pharmacy stock

The final TSX stock on my list is Neighbourly Pharmacy (TSX: NBLY), which owns and operates a chain of retail pharmacies in Canada. Priced at 30 times fiscal 2024 earnings (ending in March), NBLY is on track to expand earnings by 15% this year and 47% in fiscal 2025.

In fiscal Q1 2024, NBLY increased revenue by 72.1% year over year to $197 million. Around 95% of its growth was driven by pharmacies acquired in the last 12 months, as same-store sales were up 4.1%.

Due to its widening profit margins, the healthcare stock also offers investors a quarterly dividend of $0.045 per share, indicating a yield of 1.1%.

Down 60% from all-time highs, NBLY stock trades at a discount of 50% to consensus price target estimates.