While the broader equity indices are trading near all-time highs, investors can still identify undervalued stocks that trade at a discount to their intrinsic values. Here are three such cheap TSX stocks that Canadian investors can buy right now.
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Magna International stock
Magna International (TSX: MG) is among the largest suppliers in the automotive space. With 343 manufacturing facilities, Magna International has a presence in 28 countries. Despite a challenging macro environment, Magna International reported sales of US$11 billion in Q1 of 2024, up 3% year over year, while global light vehicle production was up 2%.
Adjusted EBIT (earnings before interest and tax) rose US$469 million in Q1, compared to US$449 million in the prior-year quarter. The increase in EBIT was attributed to higher sales and cost initiatives, as well as productivity and efficiency improvements.
Magna International stock is down 24% from all-time highs, allowing you to buy the dip. Bay Street expects Magna to increase adjusted earnings to US$5.68 per share in 2024, which suggests the stock trades at 8.4 times forward earnings.
The drawdown in Magna stock has also raised its dividend yield to 4%, making it attractive to income investors. Analysts remain bullish on Magna stock and expect shares to rise roughly 25% in the next 12 months.
Barrick Gold stock
While gold prices have gained momentum recently, companies that mine the precious metal such as Barrick Gold (TSX: ABX) have underperformed the broader markets. In Q1 2024, Barrick Gold’s adjusted earnings rose 36% while operating cash flow stood at US$760 million, allowing the mining giant to maintain a quarterly dividend of US$0.10 per share.
In Q1, Barrick Gold produced 940,000 ounces of gold and 40,000 tonnes of copper. For the rest of 2024, Barrick Gold is expected to increase production levels progressively each quarter. It is on track to end the year with adjusted earnings of US$1.07 per share, up from US$0.84 per share in 2023.
Priced at 17 times forward earnings, Barrick Gold stock is quite cheap and trades at a discount of 22% to consensus price targets. In addition to share price appreciation, Barrick Gold also offers shareholders a tasty dividend yield of 2.2%.
Aritzia stock
The final cheap TSX stock on my list is Aritzia (TSX: ATZ) trading 43% below all-time highs. Investors are worried about Aritzia’s decelerating top-line growth as its sales in Q4 of fiscal 2024 (ended in February) grew by 7% year over year to $682 million, much lower than growth of 44% and 66% in the year-ago period of 2023 and 2022, respectively.
Aritzia expects sales growth to re-accelerate in fiscal 2025 due to the expansion of its retail stores and growth in e-commerce revenue.
Its revenue growth should also boost Aritzia’s profit margins. Further, Wall Street forecasts the company to end fiscal 2025 with adjusted earnings of $1.78 per share, compared to earnings of $0.92 per share in the year-ago period.
Priced at 19 times forward earnings, ATZ stock is not too expensive, especially given earnings might touch $2.34 per share in fiscal 2026. Analysts tracking ATZ stock expect it to surge 30% in the next 12 months.
