Despite a challenging macro environment in 2023, growth stocks part of the tech sector have staged an impressive comeback year to date. However, several companies continue to trade significantly below all-time highs, allowing you to buy the dip and benefit from outsized gains when market sentiment improves in the next 12 months.
Here are three cheap or undervalued TSX stocks to buy for 2024.
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Magna International stock
An ancillary automobile company, Magna International (TSX:MG) is an undervalued TSX gem you should add to your watchlist right now. Valued at $21.2 billion by market cap, Magna International is among the largest companies on the TSX. Down 41% from all-time highs, the auto giant currently offers you a dividend yield of 3.4%.
Magna supplies components to some of the leading auto manufacturers in the world and aims to gain traction in the rapidly expanding electric vehicle market. For instance, it already supplies battery enclosures to Ford while providing dual-clutch transmissions to companies such as BMW and Stellantis.
Magna raised its forecasts for 2023 and expects sales between $42.1 billion and $43.1 billion in 2023. Its net income is forecast between $1.4 billion and $1.6 billion this year, valuing the stock at 0.5 times forward sales and 13 times forward earnings.
Analysts remain bullish and expect shares to surge roughly 35% in the next 12 months.
Well Health stock
Down 58% from all-time highs, Well Health (TSX:WELL) is a digital health company valued at $936 million by market cap. Despite the pullback in the last two years, WELL stock has returned over 3,800% to shareholders since its initial public offering in April 2016.
Part of a recession-resistant sector, Well Health has targeted accretive acquisitions to help it grow revenue from $32.8 million in 2019 to $569 million in 2022. This rapid expansion has allowed it to improve profit margins and ended the third quarter (Q3) with adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $28.2 million.
The company surpassed 1.03 million patient visits and achieved 1.58 million total care interactions in Q3. It forecasts 2024 sales at $900 million, suggesting the stock is priced at 1.1 times forward sales, which is very cheap. Due to its attractive valuation, Bay Street expects WELL stock to more than double in the next 12 months.
Hammond Power Solutions stock
The final TSX stock on my list is Hammond Power Solutions (TSX:HPS.A). A company that builds and manufactures products for electrical distribution of networks, Hammond stock has surged a staggering 19,640% in the last two decades.
A combination of price increases and strong demand allowed Hammond Power to increase backlog by 40% year over year at the end of Q3. Further, its U.S. distributor channel led top-line growth in the September quarter as sales rose by 20.9% to $179 million in Q2.
Hammond Power emphasized gross margins remained resilient at 31% while operating expenses were higher due to rising compensation costs.
Priced at 14.8 times forward earnings, Hammond Power stock is very cheap, given its earnings are forecast to rise by 29% in 2024. The company also pays shareholders an annual dividend of $0.60 per share, indicating a yield of just 0.74%. But these payouts have tripled in the last 10 years.
