The volatility surrounding equity markets provides investors with a compelling opportunity to gain exposure to quality undervalued growth stocks trading on the TSX. Right now, companies are wrestling with a wide range of macro headwinds that include interest rate hikes, inflation, and lower consumer spending.
There is a good chance for valuations of growth stocks to move lower in the next 12 months. But as it’s impossible to time the market bottom, every major dip should be viewed as a buying opportunity.
Here are three cheap, beaten-down TSX stocks you can consider buying in November 2023.
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ATS stock
Valued at $4.6 billion by market cap, ATS (TSX: ATS) provides built and installed manufacturing solutions to enterprises. It uses its expertise in manufacturing to serve the automation systems needs of companies across industries such as life sciences, food & beverage, transportation, energy, and consumer products.
In the last five years, ATS has grown its revenue by 18.2% annually and adjusted earnings by 27.7%. The TSX stock has returned close to 230% to shareholders in the past decade, easily outpacing most broader indices.
The company reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $401 million in the last 12 months, indicating a margin of 15.6%. Moreover, recurring sales account for at least 25% of the top line, providing ATS with regular cash flows across market cycles.
Priced at 17.6 times forward earnings, ATS trades at a discount of over 40%, given consensus price target estimates.
Enerflex stock
An energy infrastructure company, Enerflex (TSX: EFX) is valued at $700 million by market cap. It provides infrastructure for natural gas compression and processing to oil and natural gas exploration companies. Additionally, its portfolio of solutions includes required infrastructure for turnkey power generation, electric power solutions, and water solutions.
In the second quarter (Q2) of 2023, Enerflex reported revenue of $777 million and gross profits of $147 million, indicating a margin of almost 19%. Enerflex aims to expand gross margins and overall costs to navigate an inflationary environment. In the first six months of 2023, its after-market services business gross margins have improved by 500 basis points, while the engineered systems increased margins by 400 basis points.
These improvements should allow Enerflex to improve the bottom line and end 2024 with adjusted earnings of $0.9 per share in 2024, compared to a loss of $1.04 per share in 2022. So, priced at 6.2 times forward earnings, Enerflex stock is quite cheap and trades at a discount of 100% to consensus price targets.
Dentalcorp stock
The final TSX stock on my list is Dentalcorp (TSX: DNTL), which acquires and partners with dental practices in Canada. In Q2 of 2023, Dentalcorp reported revenue of $368.3 million, an increase of 12.6% year over year. Its adjusted EBITDA rose by 10.9%, indicating a margin of 18.2%, allowing the company to end Q2 with $35.5 million in net income.
Dentalcorp also reported a free cash flow of $33.6 million, providing it with some flexibility to lower net leverage levels, which currently stands at 4.38 times.
Dentalcorp acquired six practices in Q2, which should increase adjusted EBITDA by $5.6 million and accelerate bottom-line growth.
Priced at 15 times forward earnings, Dentalcorp stock trades at a discount of 125% to consensus price target estimates.
