1 Crazy-Cheap Canadian Stock Down 17.5% to Buy and Hold Forever

Revenue might have fallen, but sales are at record highs for this dividend stock that looks cheap no matter how you slice it.

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There are numerous ways for Canadians to find cheap stocks. It might be by share price. It might be that its price relative to its earnings is lower than its average or, indeed, the industry average. But what if it’s all of these things? That’s when you don’t just get access to a cheap Canadian stock but a valuable one — especially when it’s a dividend stock offered on the TSX today.

Luckily, today, we’re going to focus on a dividend stock that offers just that. The company is still down significantly from its highs. Yet with earnings starting to turn around, it now offers a substantial opportunity for investors looking for a long-term deal.

Premium Brand Holdings

A strong investment to consider these days would be Premium Brand Holdings (TSX:PBH), a Canadian company in the food processing and distribution industry. PBH stock operates through a network of specialty food manufacturing and distribution businesses. It produces a wide range of specialty food products, including deli meats, specialty cheeses, baked goods, seafood, and premium processed meats, among others. Some of its well-known brands include Grimm’s Fine Foods, Harvest Meats, McSweeney’s, and Freybe.

In the last few years, the company has been focusing on growth through acquisitions. This has come with a focus on quality over quantity, but of course, it also means spending. Investors, therefore, aren’t all that patient when it looks as though the company is buying up companies and not seeing the revenue associated with it.

Even so, there have been enough reasons for investors to consider the stock once more — especially after PBH stock recently reported its earnings for the first quarter.

Profit up

During the first quarter of PBH stock, the company managed to report a profit of $6.3 million. This was an increase from its $5.9 million in the same quarter the same time in 2023. This came to a $0.14 per share, up from $0.13 last year.

Furthermore, revenue came to $1.46 billion, which was up from $1.43 billion in the first quarter of last year. This increase came as specialty food revenue rose to $987.4 million. Again, this was an increase from 2023 levels of $948.8 million.

Rising momentum 

The big part, though, is that this is a continuation of momentum seen by PBH stock investors. Shares dropped as acquisition costs rose and sales in certain segments were lower, not to mention some product delays and dropping revenue.

However, this has started to turn around more recently. The company reported back in the third quarter that revenue hit $1.64 billion, with profit at $39.4 million. By the fourth quarter, revenue hit $1.55 billion, turning down slightly. As did profit at $15 million.

You’ll note this is lower than the first quarter. So, why did shares jump after earnings? This came down to two records. First, the company reported record first-quarter sales and record adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Plus, it declared its second quarterly dividend. The company, therefore, looks to be seeing enough momentum to bring in more long-term cash flow for investors.

Bottom line

While shares are still down by 17.5% from 52-week highs, PBH stock is on the climb. It trades at a fairly valued 42.25 times earnings based on its historical averages. As well as offering a 3.81% dividend yield, which is higher than its five-year average of 2.56%. So, with shares down but jumping 5% after earnings, now looks like a solid time to buy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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