As the economy displayed remarkable resilience, the equity market experienced a revival in 2023. Additionally, the anticipated moderation in interest rates provides a solid foundation for growth in stocks. Despite these positives, some fundamentally strong stocks are still trading absurdly cheaply, offering an excellent buying opportunity at current levels.
With this backdrop, let’s explore three cheap Canadian stocks long-term investors should buy right now with $500.
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Lightspeed
Lightspeed (TSX: LSPD) offers a cloud-based commerce platform for small- and medium-sized businesses. While Lightspeed continues to perform well, shares of this technology company are trading incredibly cheap. It’s worth highlighting that Lightspeed stock sports an enterprise value-to-sales (EV/sales) multiple of 2.2, significantly lower than its historical average of about 15 and is near an all-time low.
Lightspeed stock offers significant value near the current levels. Meanwhile, the company is poised to capitalize on the growing shift in selling models towards omnichannel platforms. With the expected improvement in the economy, retailers and restaurant operators are likely to invest in technology and upgrade their payment systems. This will drive demand for Lightspeed’s digital products and payment solutions.
Furthermore, Lightspeed stock will likely benefit from the shift in its go-to-market approach. The company focuses on expanding its high gross transaction value (GTV) customer base. Notably, these customers have the resources to adopt its multiple modules, driving its average revenue per user and reducing churn.
Besides growing organically, Lightspeed’s focus on accretive acquisitions will accelerate its growth rate by expanding its customer locations and strengthening its competitive positioning.
WELL Health
Shares of digital healthcare company WELL Health Technologies (TSX: WELL) are another compelling long-term pick. The company has been consistently achieving record revenue (for 19 consecutive quarters) and is profitable. While WELL Health is performing exceptionally well, its stock has an EV/sales multiple of 1.5, which is at an all-time low and much lower than its historical average.
What stands out is that WELL Health has increased its 2023 top-line guidance four times. Further, it expects to exceed $900 million in annual revenue through organic growth in 2024. This reflects a continued increase in omnichannel patient visits.
Looking ahead, WELL Health’s focus on driving organic sales and investments in artificial intelligence will accelerate its growth. Moreover, its accretive acquisitions will support its cash flows and drive its market share.
Aritzia
Shares of the luxury fashion house Aritzia (TSX: ATZ) stock lost substantial value over the past year. The stock dipped nearly 47%, significantly underperforming the broader equity market. This notable correction reflects a slowdown in its growth rate due to the lack of newness in its products, macro headwinds, and tough year-over-year comparisons.
While Aritzia stock is trading at a discounted valuation due to the decline in its value, it is focusing on introducing new styles to accelerate its top-line growth. Moreover, the strength of its e-commerce platform and ongoing expansion of boutiques will support its financials and share price.
The company projects its top line to grow at an average annualized rate of 15-17% through fiscal 2027. Meanwhile, its efforts to control costs and improve pricing will drive its earnings and share price.
