Investing in cheap or undervalued stocks is a strategy recommended by financial moguls such as Warren Buffett and Benjamin Graham. It’s essential to consistently identify a portfolio of value stocks that are positioned to perform well across market cycles and deliver outsized returns to shareholders over time.
While the broader indices trade near all-time highs, there are several stocks still priced at a discount to historical multiples in 2024. Here are two top value stocks I’d happily scoop up in July 2024.
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Propel Holdings stock
Part of the cyclical lending sector, Propel Holdings (TSX: PRL)continues to grow at an enviable pace. Valued at a market cap of $793 million, Propel is a fintech company that offers installment loans and lines of credit under brands such as MoneyKey, CreditFresh, and Fora Credit.
It operates in 30 states and provinces in North America and has originated over $1.4 billion in cumulative loans to date. The company’s combined loans and advances balance has grown by 73% annually, while revenue has grown by 47% since 2019. Due to its strong growth rates and stellar profit margins, Propel has increased its net income by 105% in the last five years.
In the first quarter (Q1) of 2024, Propel reported revenue of $96.5 million, higher than $65.6 million in the year-ago period. Its adjusted net income has improved from $8.3 million to $15.3 million in the last four quarters.
Propel runs a profitable, scalable business and pays shareholders an annual dividend of $0.52 per share, translating to a forward yield of 2.5%. Analysts expect the fintech stock to grow sales by 36% to $587 million in 2024, while earnings growth is forecast at 53.6%. Priced at 11 times forward earnings, the TSX dividend stock is quite cheap and trades at a discount of more than 30% to consensus price target estimates.
Propel stock went public in October 2021 and has since returned over 117% to shareholders. Currently, the TSX dividend stock trades 17.4% below all-time highs.
Hammond Power Solutions stock
Hammond Power Solutions (TSX: HPS.A) is a TSX stock that has already delivered game-changing returns to shareholders in the last two decades. Since July 2004, Hammond Power stock has returned a staggering 21,840% to shareholders after adjusting for dividends. Today, the stock trades 36% below all-time highs, allowing you to buy the dip.
Hammond Power enables electrification through its range of transformers, power quality products, and related magnetics. Its products are essential in the electrical distribution network through a wide range of end-user applications.
With manufacturing plants in the U.S., Canada, and India, Hammond Power increased sales by 11% to $190 million in Q1 of 2024. Its adjusted earning before interest, tax, depreciation, and amortization stood at $31 million, indicating a margin of 16%, while net income was $7.9 million or $0.67 per share in the March quarter.
Priced at 18.6 times forward earnings, the TSX stock seems undervalued, given earnings are forecast to expand by 12% annually in the next two years. Analysts remain bullish and expect Hammond Power stock to surge by over 60% in the next 12 months.
