Although the equity markets have been volatile over the last few weeks, the S&P/TSX Composite Index is up 5.9% this year and is just 1.6% lower than its 52-week high. However, the following three stocks failed to participate in this rally and are trading at a considerable discount from their 52-week highs. Given their discounted stock prices, solid underlying businesses, and healthy growth prospects, these three cheap stocks could be ideal for long-term investors.
WELL Health Technologies
WELL Health Technologies (TSX:WELL) has been under pressure over the last few months amid uncertain macroeconomic factors. Even its solid first-quarter performance has failed to improve investors’ sentiments. During the quarter, the company’s revenue grew by 37%, with organic growth contributing 13%. Also, its adjusted net income grew by 43.3% to $20.2 million, while its adjusted EPS (earnings per share) increased from $0.06 to $0.08.
Further, WELL Health continues to focus on developing artificial intelligence (AI) powered products that would help healthcare professionals detect diseases early. Its continued acquisitions, with the company acquiring 10 clinics in Ontario and British Columbia from Shoppers Drug Mart, have expanded its footprint. Also, the growing adoption of virtual healthcare services has created a multi-year growth potential for the company.
Meanwhile, amid the weakness, WELL Health has lost over 33% of its stock value compared to its 52-week high. Its NTM (next 12 months) price-to-sales multiple has declined to 0.9. Given its attractive valuation and healthy growth potential, I expect WELL Health to deliver superior returns in the long run.
Alimentation Couche-Tard
Second on my list would be Alimentation Couche-Tard (TSX:ATD), which has been under pressure over the last few weeks due to its lower-than-expected third-quarter performance. In the quarter that ended on February 4, the company’s revenue fell 2.2% to $19.62 billion, while its adjusted EPS fell 12.2% to $0.65. The company has blamed lower road transportation fuel gross margins and weaker footfall amid the challenging macro environment for weaker financials. Meanwhile, the company has lost 9% of its stock value compared to its 52-week high and trades at an attractive NTM price-to-earnings multiple of 19.1.
Given the challenging environment, ATD focused on offering value and convenience to its customers and further rolling out loyalty programs and promotions to boost its sales. It acquired certain European retail assets from TotalEnergies in January, adding 2,175 sites to increase its total network to 16,715 sites. Further, the company is continuing its five-year strategy, “10 For The Win,” which could increase its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to $10 billion by 2028. Given its long-term growth potential and discounted stock price, I believe ATD would be an excellent buy despite the near-term weakness.
Telus
The telecom sector has been under pressure over the last two years due to higher interest rates and unfavourable regulatory decisions. Amid the weakness, Telus (TSX:T) has lost 15.4% of its stock value compared to its 52-week high and trades 1.6 times its projected sales for the next four quarters.
Despite the near-term weakness, the sector offers excellent long-term growth prospects amid digitization and remote working and learning growth. Meanwhile, Telus is expanding its 5G and broadband infrastructure to expand its customer base. As of March 31, the company’s 5G network covered 31.8 million Canadians, representing 86% of the population. Also, around 3.2 million households and businesses used its fibre-optic connections.
Further, Telus’s financials could also benefit from scaling its high-growth verticles, TELUS Health and TELUS Agriculture & Consumer Goods. Notably, the company has raised its dividends 26 times since May 2011 and expects to raise them at an annualized rate of 7-10% through 2025. Considering all these factors, I believe Telus would be an ideal buy for long-term investors.
