2 Top Canadian Value Stocks in January 2024

Here’s why undervalued TSX stocks such as Tourmaline Oil should beat the broader markets in 2024 and beyond.

| More on:
Value for money

Image source: Getty Images

Despite the recent rally in equities, several Canadian stocks trade at a discount to their intrinsic value. These undervalued TSX stocks are well-positioned to derive outsized gains when investor sentiment improves further in the next 12 months due to interest rate hikes and lower inflation numbers.

Here are two top Canadian value stocks you can consider buying in January 2024.

Tourmaline Oil stock

Valued at $20.3 billion by market cap, Tourmaline Oil (TSX:TOU) is a crude oil and natural gas exploration and production company. It began operations in 2008 and has since embarked on a combination of strategic acquisitions, farm-ins, and land acquisitions in addition to its capital exploration and development program.

Tourmaline Oil is the largest natural gas producer and the fourth-largest gas processing midstream operator in Canada. It is armed with an extensive undeveloped land position with a large, multi-year drilling inventory of natural gas processing and transportation infrastructure in three core growth regions.

In the last 10 years, Tourmaline Oil has returned close to 90% after adjusting for dividends. It currently pays shareholders an annual dividend of $1.12 per share, translating to a yield of 1.88%. Moreover, the company pays investors a special dividend, which is tied to its cash flows.

In the last 12 months, it has paid total dividends of $6.55 per share, indicating a yield of almost 11%, which is quite tasty.

The company aims to invest $2.3 billion in capital expenditures in 2024, which should drive future cash flows and dividends higher. In the last five years, its base dividends have risen by 27% annually, while its payout ratio is quite sustainable at 61%.

With a free cash flow yield of 9%, Tourmaline Oil stock is priced at 9.4 times forward earnings, which is very cheap. Analysts remain bullish and expect the TSX energy stock to gain roughly 40% in the next 12 months.

Eldorado Gold stock

Valued at $3.5 billion by market cap, Eldorado Gold (TSX:ELD) is a mining company with a presence in Turkey, Canada, Greece, and Romania. It mines precious metals such as gold and silver in addition to lead and zinc.

Over the years, gold has been viewed as a store of value and a hedge against inflation, offering your equity portfolio with diversification.

Generally, gold prices gain pace when interest rates move lower, allowing mining companies to benefit from higher profit margins and cash flows.

Eldorado Gold increased gold production by 2% in the third quarter (Q3) to 121,030 ounces, while it sold 119,200 ounces at an average price of US$1,879. In the year-ago period, it sold 118,388 ounces at an average price per ounce of US$1,688.

The company’s cash operating costs also fell to US$698 per ounce, compared to US$803 per ounce due to lower treatment and refining costs. Its all-in sustaining costs stood at US$1,177 per ounce, down from US$1,259 per ounce in the prior-year quarter due to lower cash operating cost per ounce, offset by higher royalty expense.

Eldorado Gold is forecast to increase sales from $1.19 billion in 2022 to $1.52 billion in 2024. Comparatively, its adjusted earnings per share are forecasted to widen from $0.07 to $0.86 in this period. Priced at 20 times forward earnings, ELD stock is not too expensive, especially if gold prices remain elevated in the near term.  

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Tourmaline Oil. The Motley Fool has a disclosure policy.

More on Investing

grow dividends
Dividend Stocks

2 Dividend Stocks to Use as Building Blocks for Lasting Wealth

Dividend stocks that are raising their dividends over time could create lasting wealth for investors. Here are a couple of…

Read more »

Glass piggy bank
Dividend Stocks

New Investors: How to Make the RRSP Work for You Now and Not Just in Retirement

The RRSP can work for you in retirement, but it can also bring huge benefits right now for investors looking…

Read more »

Senior couple at the lake having a picnic
Dividend Stocks

Retirees: 2 High-Yielding Dividend Stocks to Buy Today

These TSX dividend-paying stocks can be a retiree’s best friend in their self-directed portfolios for additional income in retirement.

Read more »

money while you sleep
Dividend Stocks

2 Stable Stocks for Sleep-Better Investing

Boasting rock-solid underlying businesses and great financials, these two stable stocks can be perfect holdings for your portfolio.

Read more »

Money growing in soil , Business success concept.
Investing

3 Growth Stocks to Keep Your Eyes on

Growth stocks could make you lots of money, especially if you are able to buy them on sale and hold…

Read more »

Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

After their recent declines, these two Canadian dividend stocks look even more attractive to buy for the long term.

Read more »

Young woman sat at laptop by a window
Investing

Should You Buy Savaria at These Levels?

Given Savaria's solid financials, healthy growth prospects, and attractive valuation, I am bullish on the company.

Read more »

A bull outlined against a field
Investing

These 3 High-Growth Stocks Could Power the Bull Market’s Next Record Run

Are you interested in high-growth stocks? These companies could power the bull market’s next record run!

Read more »