Value stocks are those that are trading at lower share prices compared to what their performances indicate. Investors can utilize the inefficiency in the market to reap superior returns. Meanwhile, earlier this week, Statistics Canada reported that Canada’s inflation rose 2.9% last month, lower than analysts’ expectation of 3.3%. With signs of inflation slowing down, investors believe that central banks will soon adopt monetary easing initiatives.
Amid improving investor sentiments, I believe the following three value stocks would be excellent buys.
BCE
The telecommunication sector is a capital-intensive business. So, rising interest rates have put pressure on the industry over the last 12 months, with BCE (TSX:BCE) losing around 22% of its stock value compared to its 52-week high. The decision from the federal government and CTRC (Canadian Radio-television and Telecommunications Commission) to allow independent players to offer their services utilizing fibre networks of large telecoms also weighed on the company’s stock price. The selloff has dragged its valuation down, with its NTM (next-12-month) price-to-sales and NTM price-to-earnings multiples at 1.9 and 16.8, respectively.
Meanwhile, I believe the correction appears to be overdone, as the growing demand for telecommunication services amid digitization has created a long-term growth potential for the company. The Montreal-based telco has been strengthening its 5G and broadband infrastructure to expand its coverage across the country. Its expanding customer base and growing ARPU (average revenue per user) could boost its financials in the coming years. Also, higher initial capital investment and the need for regulatory approvals have created a natural barrier for new entrants, thus allowing its existing player to maintain their market share. BCE has raised its quarterly dividend to $0.9975/share, with its forward yield at 7.79%.
Lightspeed Commerce
Lightspeed Commerce (TSX:LSPD) has been under pressure since reporting its third-quarter performance for fiscal 2024 on February 8, losing around 32% of its stock value. Although it reported an impressive performance during the quarter, the management’s cautious outlook due to the uncertain macro environment dragged its stock price down. During the quarter, the company’s revenue grew by 27%. Also, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) stood at $3.6 million, a substantial improvement from a loss of $5.4 million in the previous year’s quarter.
Meanwhile, the company’s management is cautious in the near term due to the uncertain macro environment and the adoption rate of its Unified Payments in international markets. Despite the near-term volatility, its fundamentals remain strong amid a growing customer base, a customer shift towards higher GTV locations, and improving profitability. Further, innovative product development, expansion to new markets, and growing addressable markets could continue to drive its financials in the coming years.
However, the Montreal-based commerce solutions provider trades at an attractive valuation amid the recent selloff. It currently trades at a price-to-book multiple of 0.8 and an NTM price-to-sales multiple of 1.9, making it an attractive buy.
WELL Health Technologies
WELL Health Technologies (TSX:WELL) is my final pick. The digital healthcare company has lost over 37% of its stock value compared to its 52-week high. The increase in net losses in the previously announced third-quarter earnings appears to have made investors skeptical, dragging its stock price down. Meanwhile, the company has taken several initiatives, such as streamlining and cost-optimizing its operations, to enhance efficiency and boost its cash flows.
Besides, the digitization of clinical procedures and growing demand for virtual healthcare services have increased the demand for the company’s services. The company is developing artificial intelligence-powered tools and new products that could strengthen its position and boost its financials in the coming quarters. The company’s management hopes to post $900 million in revenue this year. Given its growth prospects and a cheaper NTM price-to-sales multiple of one, I believe WELL Health Technologies will deliver superior returns over the next three years.
