Quality value stocks remain the best investment option for Canadians, given the volatility associated with the equity markets right now. In the last two years, the TSX index has not delivered significant returns due to rising interest rates, inflation, and lower consumer spending. However, several stocks continue to trade at attractive multiples and are positioned to benefit immensely when market sentiment recovers.
Here are two top Canadian value stocks you can buy in November 2023.
TFI International stock
A company that provides transportation and logistics services in the U.S., Canada, and Mexico, TFI International (TSX: TFII) is valued at $12.8 billion by market cap. TFII stock trades 20% below all-time highs but has returned close to 750% in dividend-adjusted gains in the last 10 years.
TFI reported revenue of $1.91 billion in the third quarter (Q3), compared to $2.24 billion in the year-ago period, due to lower volumes and weaker demand from end markets. It reported an operating income of $200.6 million, significantly lower compared to $318.4 million in the prior-year quarter.
The sale of TFI’s Mexico-based non-asset logistics business last August also impacted the top line for the company in the September quarter. Trading at 16.9 times forward earnings, TFII stock is reasonably priced, given its earnings growth is forecast to accelerate in the next four years. Analysts remain bullish and expect TFII stock to increase by 18% in the next 12 months.
Additionally, TFII also pays shareholders a quarterly dividend of $0.472 per share, indicating a yield of 1.3%. While the yield is not too generous, TFII has increased dividends by almost 400% in the last 14 years.
BRP stock
Another undervalued TSX stock is BRP (TSX: DOO), which is valued at $7.2 billion by market cap. With manufacturing facilities in Canada, the U.S., Mexico, Finland, Austria, and Australia, BRP manufactures and distributes a portfolio of auto vehicles, including snowmobiles, watercraft, and on and off-road vehicles, in addition to marine propulsion systems and recreational aircraft.
Despite a challenging macro environment, BRP increased sales by 14% year over year in fiscal Q2 of 2024 (ended in July) due to higher product volume and favourable pricing. Its powersports gross margin improved by 120 basis points to 26.5%, which showcases the company’s pricing power. Moreover, normalized EBITDA (earnings before interest, tax, depreciation, and amortization) was up 13% to $473 million, while adjusted earnings rose 9% to $3.21 per share.
BRP continues to expand its customer base, which allows it to sustain product demand across market cycles. Analysts tracking the TSX stock expect its earnings to rise by 14% annually in the next five years. Priced at 7.4 times forward earnings, DOO stock is really cheap and trades at a discount of 50% to consensus price target estimates.
BRP ended Q2 of fiscal 2024 with free cash flow of $387 million, significantly higher than $220 million in the year-ago quarter. Given it pays shareholders a quarterly dividend of $0.18 per share, BRP stock has a payout ratio of less than 5%, which suggests the company has enough flexibility to reinvest in growth and increase dividends by a wide margin.
