The S&P/TSX Composite Index has trended higher over the past year, led by a significant rebound in most Canadian stocks. While the broader market has remained strong, a handful of fundamentally strong stocks are still trading absurdly cheap due to short-term concerns. For long-term investors, the discounted valuation represents a compelling buying opportunity.
Against this backdrop, here are five absurdly cheap Canadian stocks long-term investors could buy now for $500.
Lightspeed
Speaking of absurdly cheap stocks, one could consider investing in Lightspeed (TSX: LSPD). Shares of this technology company are down over 34% year to date. Moreover, Lightspeed stock is trading at a next-12-month (NTM) enterprise value-to-sales (EV/sales) multiple of 1.2, which is near an all-time low, making it too cheap to ignore near the current levels.
While Lightspeed stock is absurdly cheap, its fundamentals remain strong, and the company is poised to benefit from the ongoing digital shift. Moreover, Lightspeed’s growing customer base with high gross transaction volume (GTV) bodes well for long-term growth as it will drive its average revenue per user and margins and lower churn. Further, Lightspeed’s focus on improving unit economics and delivering sustainable earnings is encouraging.
Shopify
Trading at an EV/sales multiple of 8.9 (much lower than its five-year average), shares of e-commerce platform provider Shopify (TSX: SHOP) could be a valuable addition right now. The stock has dropped significantly in value from its COVID-led peak due to the normalization in demand and concerns related to the slowdown in the e-commerce sector. However, this correction is a solid buying opportunity for long-term investors.
Shopify is well-positioned to capitalize on the shift towards a multi-channel commerce platform. Moreover, Shopify’s diverse and innovative offerings, such as payment processing and financing program Capital, bode well for growth. In addition, its focus on cost-reduction initiatives, integration of artificial intelligence (AI) technology in its products, and shift towards an asset-light model position it well to deliver sustainable earnings in the long term.
Ballard Power Systems
Ballard Power Systems (TSX: BLDP) stock is down about 34.4% year to date, reflecting softness in its order book amid macro uncertainty. In addition, the company continues to generate losses, which has weighed on investors’ sentiment. Nonetheless, Ballard Power has exposure to the sector with secular tailwinds. Its proton exchange membrane (PEM) fuel cell products will likely see an increase in demand as the adoption of green energy accelerates.
The fuel cell maker will likely gain from the ongoing electrification in the automotive space, including electric buses, battery-electric vehicles, and trucks. Moreover, the launch of new products, growing customer base, expansion of manufacturing capacity, and cost-reduction initiatives will further drive its financials and share price.
Well Health
Shares of digital healthcare company WELL Health Technologies (TSX: WELL) have shown recovery. However, it is still trading with a next 12-month EV/sales multiple of 1.6, reflecting a massive discount from its historical levels. While the stock is trading cheap, it continues to generate solid sales and focuses on profitable growth.
The digital healthcare company’s financials will likely benefit from its omnichannel business model, predictable revenue base, growing patient visits, and accretive acquisitions. In addition, WELL Health’s focus on cost reduction and integration of AI will further improve its efficiency and support its growth.
BCE
BCE (TSX: BCE) is another high-quality stock trading cheap. Shares of this wireless and internet service provider are down more than 26% over the past year, underperforming the broader markets. Heightened competition, high interest rates, and inflationary pressure on consumer discretionary spending weighed on its stock price.
Nevertheless, the telecom giant’s focus on new growth areas, such as digital transformation and cloud and security services, is encouraging. Moreover, its initiatives to increase its customer base and reduce costs are likely to support its margins and share price. BCE is also a solid dividend stock offering a high yield. It has increased its dividends for 16 consecutive years and offers a lucrative yield of 9.2%.
