Investing in cheap TSX stocks should help Canadians generate market-beating returns over time. Value investing is an exhaustive process where you identify a portfolio of fundamentally strong undervalued stocks and benefit from outsized gains when market sentiment improves. Here are three remarkably cheap TSX stocks you can consider buying right now.
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Eldorado Gold stock
While gold prices are hovering near all-time highs, companies that mine the yellow metal have underperformed in the last two years. One gold mining stock that has bucked the trend is Eldorado Gold (TSX: ELD). Valued at $4.6 billion by market cap, Eldorado Gold stock has returned over 50% in the last 12 months and has more than doubled investor returns in the last five years.
Despite its stellar returns, Eldorado Gold trades at 14 times forward earnings, which is quite low. Comparatively, analysts forecast adjusted earnings to expand from $0.78 per share in 2023 to $1.63 per share in 2024 and $1.82 per share in 2025.
In the first quarter (Q1) of 2024, Eldorado reported adjusted net earnings of $55.2 million, or $0.27 per share, due to higher gold prices. The company ended Q1 with total liquidity of $628 million, including $515 million in cash, providing it with the flexibility to reinvest in capital expenditures and fuel organic growth higher.
With interest rate cuts on the horizon, prices of the precious metal should move higher, resulting in an earnings surge for Eldorado and other mining companies.
Bombardier stock
Valued at $9.6 billion by market cap, Bombardier (TSX: BBD.B) has returned close to 800% in the last four years. The airline manufacturer reported revenue of $1.3 billion in Q1 of 2024. It delivered 20 aircraft in Q1 and expects to deliver between 150 and 155 aircraft this year.
Bombardier’s adjusted EBITDA (earnings between interest, tax, depreciation, and amortization) of $205 million indicates a margin of 16%, an increase of 140 basis points year over year. The company ended Q1 with a backlog of $14.9 billion, as order intake was 60% higher than the year-ago period.
Analysts tracking the TSX stock expect adjusted earnings to expand from $5.39 per share in 2023 to $9 per share in 2025. Priced at 11 times forward earnings, Bombardier stock remains a top investment choice in 2024.
Cenovus Energy stock
The final undervalued stock on my list is Cenovus Energy (TSX: CVE), a Canada-based energy giant. In the last decade, Cenovus Energy has trailed the broader markets, falling close to 20%. Today, it is valued at $50 billion by market cap and pays shareholders an annual dividend of $0.74 per share, indicating a yield of 2.7%.
Priced at just 10 times forward earnings, Cenovus Energy is cheap, given that adjusted earnings are forecast to rise by 24% annually in the next five years.
Higher crude oil prices allowed Cenovus to generate $3.2 billion in operating income in Q1. Its adjusted funds flow stood at $2.2 billion, while its free funds flow was $1.2 billion. Comparatively, it paid shareholders roughly $350 million in quarterly dividends, translating to a payout ratio of less than 30%.
Analysts remain bullish and expect the TSX dividend stock to gain around 30% in the next 12 months.
