3 Oversold Stocks to Buy Before They Surge

Oversold stocks are a great place to start looking for valuable stocks, but these three could be the best.

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It continues to be crucial for investors to identify opportunities that others might overlook in today’s market. That’s why today we’re going to look at some oversold stocks that investors should consider on the TSX today. Canfor (TSX:CFP), MTY Food Group (TSX:MTY), and Kinaxis (TSX:KXS) are three companies that have recently been interesting. While their stocks have been oversold, there are compelling reasons to consider them as strong purchases right now.

Canfor

Canfor, a prominent player in the lumber industry, has seen its stock Relative Strength Index (RSI) plummet to 11.38. Shares have also been down 28% in the last year. The company reported a second-quarter (Q2) 2023 operating loss of $67 million. This included a $57 million reversal of a previously recognized inventory write-down. Additionally, adjusted operating loss amounted to $124 million. Adjusted shareholder net loss stood at $44 million, or $0.36 per share.

Despite these challenges, Canfor stock continues to report strong earnings in its European and United States South operations. This suggests that the company’s problems are localized and primarily associated with persistent challenges in its British Columbia operations.

Sustained pressure on global lumber market fundamentals and pricing, particularly in North America, has affected Canfor stock. However, it’s worth noting that despite ongoing curtailments in British Columbia and the permanent closure of Chetwynd facilities. Therefore, Canfor has increased North American lumber production and shipments. This reflects the company’s adaptability and resilience.

Furthermore, Canfor stock has been affected by a significant deterioration in global pulp market fundamentals. This led to the closure of the pulp line at Prince George Pulp and Paper Mill. The situation worsened with the short curtailment of Northwood NBSK pulp mill amidst the British Columbia port strike. Nevertheless, Canfor’s diversification across the lumber and pulp industries and its operational adaptability give investors reason to be optimistic about its long-term potential. And why it’s one of the great oversold stocks to consider.

MTY Food Group

MTY Food Group’s stock has an RSI of 17.05 and experienced a 6% decline in the last year. However, the company’s recent financial performance tells a different story. In Q3 2023, MTY Food Group reported a substantial rise in profit compared to the previous year. The company’s net income attributable to owners was $38.9 million, or $1.59 per diluted share, compared to $22.4 million, or 92 cents per diluted share, in the same quarter the previous year. Moreover, revenue surged by an impressive 74% from $171.5 million to $298.1 million.

These strong financial results are backed by a 3% increase in same-store sales compared to the same quarter last year. MTY Food Group operates quick-service, fast-casual, and casual dining restaurants under more than 90 different banners in Canada, the United States, and internationally. This diversity and the company’s ability to adapt to changing market conditions make it an intriguing prospect for investors, despite the recent stock performance.

Kinaxis

Kinaxis, a leading provider of supply chain management solutions, may have an RSI of 26.25, with shares up by only 2.5% in the last year. However, the company’s strong fundamentals paint a different picture. In Q2 2023, Kinaxis reported a 25% growth in Software as a Service (SaaS) revenue and an impressive adjusted earnings before interest, taxes, depreciation and amortization margin of 14%.

What makes Kinaxis particularly appealing is its ability to secure a record number of quarterly customer wins, pushing its customer base beyond 300. Additionally, the company experienced a 22% growth in annual recurring revenue. These numbers demonstrate that Kinaxis is thriving and gaining traction in its industry.

John Sicard, president and chief executive officer of Kinaxis, mentioned, “We had a record number of customer wins, an increasing win rate against competitors, and the highest amount of incremental subscription business won in any second quarter in Kinaxis’s history.” Kinaxis’s unique approach to supply chain management positions it as a standout in the field, capable of delivering unparalleled results. So, yet again, another of the oversold stocks that would be of great consideration.

Bottom line

The RSI and recent stock performances of Canfor, MTY Food Group, and Kinaxis may seem discouraging at first glance. Yet a closer examination reveals strong fundamentals and the potential for growth. Canfor’s resilience in the face of challenges, MTY Food Group’s robust financial performance, and Kinaxis’s leadership in the supply chain management industry make these stocks worthy of consideration for investors seeking opportunities. However, as with any investment, it’s crucial to conduct thorough research. However, oversold stocks are a great place to start.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in Kinaxis. The Motley Fool has positions in and recommends MTY Food Group. The Motley Fool recommends Kinaxis. The Motley Fool has a disclosure policy.

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