Canadian equity markets have bounced back strongly this month, with the S&P/TSX Composite Index rising 4.3% and up 8.9% this year. Despite the momentum in equity markets, the following three stocks are trading at a substantial discount to their 52-week highs, providing excellent buying opportunities.
Magna International
Magna International (TSX: MG) is a mobility technology company with worldwide manufacturing operations, product development, and sales centres. Amid the supply chain issues and weakness in the EV (electric vehicles) segment, the company has been under pressure over the last three years, losing over 52% of its stock value compared to its 2021 highs. The steep correction has also dragged its valuation down to attractive levels, with its NTM (next 12 months) price-to-sales and NTM price-to-earnings multiples at 0.3 and 7.4, respectively.
Further, the EV segment offers excellent long-term growth potential despite the near-term weakness. Market research companies are projecting the segment to witness double-digit growth over the next 10 years. Given its expertise and healthy investments in powertrain electrification, battery enclosures, and active safety segments, MG is well-equipped to benefit from the market expansion. Moreover, the company has rewarded its shareholders by raising its dividends at an annualized rate of 10% for 14 years and offers a forward yield of 4.3%.
Nutrien
Nutrien (TSX: NTR) operates a network of production and distribution facilities, providing crop inputs and services globally. Falling fertilizer prices have hurt its profitability, thus dragging its stock price down. The company has lost over half its stock value compared to its 2022 highs. The steep correction has dragged its valuation down, with the company trading at an NTM price-to-sales and NTM price-to-earnings multiples of 0.9 and 12.6, respectively.
Meanwhile, the demand for potash and nitrogen continues to rise. Management projects global potash demand to grow annually by 12 to 17 million metric tons through 2030. Given its low-cost production assets and extensive global supply chain, the company can benefit from the market expansion. Besides, the company has planned to invest around $2.2-$2.3 billion annually until 2026 to strengthen its asset base. Also, it is focused on improving operational efficiency and cost savings and advancing highly targeted retail growth opportunities to drive its profitability.
Moreover, Nutrien has raised its dividends at an annualized rate of 5% over the last six years, with its forward yield currently at 4.3%. Considering its cheaper valuation, healthy long-term growth potential, and attractive dividend yield, I believe Nutrien would be an excellent buy.
Telus
The weakness in the Canadian telecom sector amid higher interest rates and unfavorable policy changes has led to a selloff in Telus (TSX: T), one of three top Canadian telecom players. Compared to its 2022 highs, it has lost over 37% of its stock value. Consequently, T stock’s valuation looks cheaper, with its NTM price-to-sales multiple at 1.6.
Despite the near-term weakness, the sector’s long-term growth potential looks healthy amid the growing demand for telecommunication services due to digitization. Besides, Telus continues to expand its 5G infrastructure, covering 86% of the country’s population. Supported by its bundled offerings and consistent execution, the company has enjoyed less than 1% churn in the postpaid mobile phone segment for 10 years.
Moreover, its other growth businesses, including TELUS Health and TELUS Agriculture & Consumer Goods, could also support its financial growth in the coming years. Meanwhile, its financial position also looks healthy, with liquidity of $4.2 billion. Further, the company has raised its dividends 26 times since 2011 and hopes to raise it at an annualized rate of 7 to 10% through 2025. Amid the steep correction, its forward dividend yield has increased to 7.2%, making it an attractive buy.
