It has been a strong run up for Canadian stocks in 2024. However, there are still bargains to be found. Some of these stocks are on the sidelines due to temporary issues or challenges. Take a long-term, patient approach and there could be considerable upside both in results and valuation. Here are three value stocks to buy right now.
Calian: A diversified industrial/tech stock with growth ahead
One growth stock that has lagged the recent rally is Calian Group (TSX: CGY). Calian has a market cap just below $700 million, but it is not well known by the market. One reason for this because it provides services largely to governments, private businesses, and public organizations (like NATO and NASA).
Calian has a diversified business in healthcare services, training, cybersecurity, and advanced technologies (nuclear, satcom, and electronics/antennas).
2023 was a bit of a down year for the company and the stock. Yet, the company has made some attractive acquisitions that have expanded its slate of services and diversified its geographic exposure.
In 2024, it has guided to grow revenues by at least 11% and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) by at least 25%. This suggests it expects to see solid margin improvements in the year.
Calian only trades with a forward price-to-earnings (P/E) ratio of only 12 and an EV (enterprise value)-to-EBITDA ratio of only nine. For growth at a reasonable price (which is hard to find these days), Calian stock looks like an attractive stock to buy today.
Enghouse: A beaten-up tech stock
Another tech stock that doesn’t get much attention is Enghouse Systems (TSX: ENGH). This company used to be one of Canada’s best growth stocks. However, since the pandemic, sales in its communication segment have seen a fair decline. Its stock has pulled back significantly since 2020.
Yet, there are reasons to like this stock. Enghouse persistently generates a lot of excess cash. Last year, it had a 25% free cash flow margin. It generates between $18 million and $30 million of cash per quarter. While it is not growing much organically, it has a substantial $240 million pile of net cash built up.
While it has yet to make a major acquisition, it has deployed its capital into several accretive smaller acquisitions. At some point, it could pull the trigger on something larger, and the stock could see substantial upside. Right now, it trades close to its lowest EV/EBITDA ratio in nearly 10 years.
Tourmaline: A top energy stock
Tourmaline Oil (TSX: TOU) is another value stock worth looking at right now. Next to Canadian Natural Resources, Tourmaline is seen as one of the best energy companies in Canada.
Regardless of its name, Tourmaline is the largest producer of natural gas and LNG (liquified natural gas) in Canada. It has excellent assets/energy reserves, a top management team, and a strong balance sheet.
2023 has been an abysmal year for the price of natural gas. However, things are starting to look up as new LNG export terminals get completed on the Canadian West Coast.
Tourmaline continues to generate substantial free cash flow, which it has largely distributed to shareholders in the form of special dividends. These dividends are smaller than in past years but still attractive. If you can look past the present weakness, now may be an ideal time to pick up this high-end energy company.
