As the Bank of Canada and the U.S. Federal Reserve (the Fed) contemplate rate cuts over the coming months, questions linger as to which firms can benefit the most. Undoubtedly, rate cuts and Fed meetings are sure to cause a lot of intraday action in a range of stocks in the U.S. and in Canada.
That said, I think new investors should be most focused on the longer term rather than looking to pursue the quick and easy money to be had over the near term. Indeed, rate cuts will come, but, as always, you’ll need to be patient, as it may take a while longer before rates begin to fall.
Further, there’s no telling where the floor in rates will be, as central banks may not be looking for a return of those absurdly low rates we enjoyed before the COVID pandemic.
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Boyd Group stock: A growth play that can do well, regardless of when the rate cuts begin
In any case, we’ll concentrate on a Canadian stock that I view as an intriguing pick-up, regardless of when the Bank of Canada chooses to slash rates. Undoubtedly, Boyd Group Services (TSX: BYD) is a mid-cap play that has some pretty underrated long-term growth characteristics.
While lower rates may be a positive for a wide range of firms, I view Boyd as a company that can continue to grow, regardless of how the rest of the stock market reacts to those coming central bank meetups. In other words, the mid-cap’s fate is in its own hands. And with a wonderful management team, that’s a good thing.
For those unfamiliar with Boyd, it’s a rather small (just shy of a $6 billion market cap) company in the auto-body repair business. The company reported its fourth-quarter numbers just a few weeks ago. And while those profits and sales were higher year over year, the stock hasn’t really been able to catch a bid higher.
So, what’s going on over at Boyd, and is the recent slip in shares a buying opportunity for value investors seeking reliable growth over the next 10 years?
The autobody repair firm provided some pretty decent numbers, but the forward-looking outlook was not to the liking of many shareholders. The firm pointed out that weather was having an effect on demand and that higher labour costs have been a headwind — one that may not be so quick to dissipate.
Either way, Boyd stock stands out as quite cheap right here. And though recent macro headwinds have impacted demand, I still view it as relatively stable, especially for those who are looking to play the long game. As shares come in (now down 14% from their latest peak), I’d not be afraid to start doing some buying at around $276 and change per share.
What about valuation?
The stock trades for around 1.5 times price to sales and 42.9 times forward price to earnings. Should the stock reach the $250 range (a level of technical support), investors may have the opportunity to snag shares at a nice discount.
