After witnessing a decline for the previous three months, the Canadian equity markets started November positively, with the S&P/TSX Composite Index rising 1.1% yesterday. With the Federal Reserve keeping its benchmark interest rate unchanged for the second consecutive time, investors are optimistic that the central bank will not further hike interest rates this year. Amid the improving investor sentiments, you can buy the following three under-$30 Canadian stocks to earn superior returns in the long run.
Nuvei
Nuvei (TSX: NVEI) has been under pressure over the last few months, losing around 57% of its stock value in the previous three months. Its weak second-quarter earnings and the lowering of its 2023 guidance have weighed on the company’s stock price. The company’s management has blamed the longer than anticipated lag times in new business and the ending of its relationship with one of the large customers for slashing its outlook. However, I believe the selloff is overdone, thus offering excellent buying opportunities for long-term investors.
With online shopping becoming popular, more people are adopting digital payment methods, thus expanding the addressable market of Nuvei. The company, which allows its clients to accept next-gen payments, is increasing its APM (alternative payment method) portfolio and introducing innovative products. The company has also launched an artificial intelligence-powered data and analytics platform that provides insights to its clients. Further, the company is expanding its digital footprint to drive its customer base and financials.
Amid these growth initiatives, Nuvei’s management expects to grow its revenue at an annualized rate of 15-20% in the medium term. It is also optimistic about increasing its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin to over 50%. Considering its growth prospects and a cheap NTM (next 12-month) price-to-earnings multiple of 7.8, I am bullish on Nuvei.
Telus
Telus (TSX: T) would be another excellent long-term bet in this digitally connected world. With the growing demand for telecommunication services, the company is expanding its 5G and broadband infrastructure with an aggressive capital-expenditure program. The company now provides PureFibre connections to approximately 3.1 million premises while expanding its 5G network coverage to 84% of Canadians. Amid these investments, the company added 293,000 new connections in the second quarter, while its ARPU (average revenue per user) grew by 1.8%. Its churn rate remained lower than 1% at 0.91%, which is encouraging. The solid operating metrics could continue to drive its financials in the coming quarters.
Its Healthcare business unit reported an 11% EBITDA growth during the quarter amid increasing digital health transactions and virtual care membership. Meanwhile, its Agriculture and Consumer Business unit posted flat revenue growth amid softness due to macroeconomic challenges. However, the long-term growth prospects of both business units look healthy. Considering its multiple growth drivers and an attractive NTM price-to-earnings multiple of 21.6, I expect Telus to deliver superior returns in the long run.
Pizza Pizza Royalty
My final pick is a monthly-paying dividend stock, Pizza Pizza Royalty (TSX: PZA), which operates a highly franchised restaurant business. The company collects royalties from its franchisees based on their sales. So, commodity and wage inflation are not hurting its royalty pool income. Positive same-store sales growth and network expansion drove its cash flows, thus allowing it to reward its shareholders with healthy dividends.
Meanwhile, Pizza Pizza Royalty has raised its monthly dividend seven times since April 2020. With a monthly dividend of $0.075/share, its forward yield is a juicy 6.71%. Further, the company is expanding its restaurant network and projects its restaurant count to increase by 3-4% this year. Besides, its menu innovation, promotional activities, and restaurant renovation programs could boost its same-store sales in the coming quarters. Also, the company’s valuation looks attractive, with its NTM price-to-earnings multiple at 13.8, making it an attractive buy.
