The economy has displayed more resilience than many expected in 2023. However, several fundamentally strong TSX stocks are trading at a discounted valuation and offering significant value due to the short-term macro challenges.
With this backdrop, let’s look at two Canadian stocks offering significant value near the current levels.
goeasy
Trading at the next 12-month (NTM) price-to-earnings multiple of 7.5, goeasy (TSX:GSY) stock offers significant value near the current levels. goeasy provides unsecured and secured loans to non-prime borrowers. Moreover, it has been growing its revenue and earnings at a double-digit rate.
For example, goeasy’s top line has grown at a CAGR (compound annual growth rate) of 19.44% in the last five years. At the same time, its earnings per share (EPS) have increased at a CAGR of 31.91%. Further, in the initial six months of 2023, goeasy’s bottom line marked a growth of 15% year over year.
Looking ahead, the higher loan originations, stable credit and payment performance, and operating leverage will enable goeasy to continue to deliver double-digit earnings growth. This supports my bull case for the stock. Notably, goeasy stock’s valuation appears compelling given its double-digit earnings growth. Further, goeasy is a Dividend Aristocrat. It has paid uninterrupted dividends for 19 years and increased the same for nine consecutive years. Currently, it offers a reliable dividend yield of 3.39%.
Overall, goeasy stock offers significant value near the current levels. Moreover, its high growth and decent dividend yield make it a solid long-term pick.
Lightspeed
Shares of the commerce-enabling company Lightspeed (TSX:LSPD) are too cheap to ignore near the current levels. Lightspeed provides a cloud-based commerce platform that unifies its customers’ physical and online operations. The company earns money by selling its cloud-based software subscriptions and payment solutions.
While Lightspeed stock is trading at a massive discount, the company has been steadily growing its organic revenues and heading towards achieving sustainable profitability, which is encouraging. It’s worth highlighting that Lightspeed stock is trading at the NTM enterprise value-to-sales multiple of 1.6, which is near its all-time low. Its top line increased by over 20% in the first quarter of fiscal 2024, while it managed to grow ARPU (average revenue per user) and reduce losses.
Lightspeed is poised to benefit from the ongoing shift in selling models towards omnichannel platforms. Its digital products will witness a strong demand, as small- and medium-sized retailers and restaurant operators start spending on modernizing their legacy payments platform and expanding to new locations.
The company has changed its go-to-market approach and only focuses on large customers with high GTV (gross transaction volume). A customer with high GTV can use Lightspeed’s multiple modules, which works in favour of the company as it enhances its ARPU, reduces churn rate, and cushions its margins. Further, the company’s ability to accelerate growth through acquisitions bodes well for growth.
In summary, Lightspeed is poised for growth while its stock is trading cheap, providing a solid buying opportunity near the current levels.
