After a challenging last month, Canadian equity markets have made a bright start to this month, with the S&P/TSX Composite Index rising 0.8%. Earlier this month, the Labor Department reported that the United States economy added 206,000 jobs in June, higher than the projected 200,000. However, the unemployment rate rose to 4.1%, the joint highest since October 2021. The rise in the unemployment rate has raised hopes of interest rate cuts, thus driving the equity markets. Amid improving investors’ sentiments, here are three top under-$20 TSX stocks you can buy now.
Lightspeed Commerce
Lightspeed Commerce (TSX: LSPD) offers omnichannel solutions to retail, hospitality, and golf businesses across 100 countries. Amid the challenging macro environment, the company has been under pressure over the last few months. It has lost around 35% of its stock value compared to its 52-week high and trades at 1.9 times its projected sales for the next four quarters.
However, Lightspeed’s long-term growth potential looks healthy amid the expansion of the omnichannel selling model. The company continues to focus on developing new products to meet the increasing needs of its customers, thus expanding its customer base and average revenue per customer. Moreover, its unified POS (point of sale) and payment initiative has resonated well with its customers, expanding its gross payment volume. Further, the company has slashed its headcount by 10% and is exploring other cost-cutting initiatives to support sustainable and profitable growth.
Meanwhile, Lightspeed’s management projects its top line to exceed $1 billion in fiscal 2025 while its entire year’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to become positive for the first time. Given its discounted stock price and healthy growth potential, I expect Lightspeed to deliver superior returns over the next three years.
Savaria
Second on my list is Savaria (TSX: SIS), which offers accessibility solutions worldwide. Supported by its solid first-quarter performance, the company has delivered over 20% of returns this year. Despite the recent increase, the company’s valuation looks cheaper, with its NTM (next 12-month) price-to-sales and NTM price-to-earnings multiples at 1.4 and 19.6, respectively.
With the rise in the aging population and income levels, the demand for accessibility solutions could only increase in the coming years. Given its comprehensive product offerings, global manufacturing facilities, and solid distribution network, Savaria is well-positioned to benefit from this market expansion. Its “Savaria One” initiative could help optimize product prices, streamline its operations, improve procurement and supply chain efficiency, and increase its investments in research and development. It also pays a monthly dividend of $0.0433/share, with its forward yield at 2.9%.
Pizza Pizza Royalty
Another under-$20 Canadian stock I am bullish on would be Pizza Pizza Royalty (TSX: PZA), which operates 776 Pizza Pizza and Pizza 73 brand restaurants through franchisees. It collects royalty from its franchisees based on their sales, making its financials less susceptible to commodity and wage inflation. The company has posted positive same-store sales for the last 12 quarters with its value-oriented menu offerings, operational excellence, and technology innovations.
The company is constructing new restaurants and expects to increase its restaurant count by 3-4% this year. Its healthy same-store sales and expanding footprint could continue to drive its financials, thus allowing it to reward shareholders with healthy monthly dividends. The company currently offers a monthly dividend of $0.0775/share, translating into a forward dividend yield of 7.17%.
