Undervalued stocks are companies trading at a multiple below their intrinsic value. Ideally, value stocks trade at a discount and are positioned to deliver outsized gains once investor sentiment improves.
Warren Buffett has a successful history of identifying value stocks, which, combined with his stock-picking abilities, has made the Oracle of Omaha one of the richest individuals on the planet. Here are absurdly undervalued TSX stocks you can consider buying in July 2024.
NFI Group stock
Valued at $1.85 billion by market cap, NFI Group (TSX: NFI) manufactures and sells buses in North America, the U.K., Europe, and Asia Pacific. It has two primary business segments that include the following:
Manufacturing Operations: It designs, manufactures, and sells transit buses, coaches, medium-duty shuttles, and low-floor cutaway buses.
Aftermarket Operations: The segment is engaged in the sale of aftermarket parts of buses and coaches.
In the last 10 years, NFI has trailed the broader markets, rising “just” 68.4% after accounting for dividend reinvestments. Moreover, the TSX stock trades 70% below all-time highs, allowing you to buy the dip.
In recent years, NFI has focused on expanding the manufacturing of battery-powered buses due to rising demand. Recently, NFI’s subsidiary Alexander Dennis Ltd. announced it booked an order from Stagecoach to deliver 244 zero-emission buses, its largest single order for battery-powered buses.
The landmark deal with Stagecoach showcases the growing demand for electric vehicles as governments all around the world aim to fight climate change.
NFI reported revenue of US$723 million in the first quarter (Q1) of 2024, an increase of 38% year over year. In the last 12 months, its sales have grown by 36% to US$2.88 billion, and the company is forecast to end the year with revenue of US$4.56 billion, up 24.6% year over year.
Strong top-line growth will help NFI expand its profit margins. According to Bay Street, NFI should report adjusted earnings of $1.2 per share in 2025, compared to a loss per share of $1.73 per share in 2023. Priced at 12 times forward earnings, NFI stock should outpace the TSX index going forward.
Barrick Gold stock
While gold prices are hovering near record highs, gold mining stocks have not replicated these gains. Generally, the performance of mining stocks is tied to the prices of the commodities they mine.
Valued at $42.5 billion by market cap, Barrick Gold (TSX: ABX) stock trades over 50% below all-time highs, increasing its dividend yield to 2.3%.
In Q1 of 2024, Barrick Gold increased its net income by 36% year over year to US$0.19 per share, above estimates of US$0.16 per share. Due to higher gold prices, Barrick Gold increased its earnings before interest, tax, depreciation, and amortization margin by 5% to 41%.
Moreover, Barrick Gold ended Q1 with an operating cash flow of US$760 million, allowing it to maintain a quarterly dividend of US$0.10 per share.
With close to US$4 billion in balance sheet cash, Barrick Gold has enough flexibility to tide over an uncertain macro environment. Priced at 15.9 times forward earnings, Barrick Gold stock is quite cheap and trades at a discount of 25% to consensus price targets.
