Global equity markets have turned volatile this month amid recession fears, with the S&P/TSX Composite Index falling 5.3%. However, long-term investors should not get bogged down by this volatility. Instead, they should utilize this pullback to accumulate quality stocks and earn superior returns in the long run. Meanwhile, given their attractive valuations and healthy growth prospects, I believe the following three value stocks are excellent buys now.
goeasy
goeasy (TSX: GSY) has lost over 8% of its stock value this month amid the broader weakness, with its NTM (next-12-month) price-to-earnings multiple falling to 10.4. Meanwhile, the Bank of Canada has cut its benchmark interest rates twice this year and could cut once more this year. Lower interest rates could increase credit demand, benefiting goeasy.
The company has acquired just 2% of the $218 billion Canadian subprime market. So, it has scope to expand its market share. Given its expanded product offerings, multiple distribution channels, geographical expansion, and healthy financial position, the company is well-equipped to boost its market share. Meanwhile, goeasy’s management projects its loan portfolio to reach $6 billion by 2026, representing a 50% increase from its June levels. The loan portfolio expansion could boost its top line at an annualized rate of 12.9% while delivering a return on equity of over 21% annually.
Moreover, goeasy has rewarded its shareholders by raising its dividend at an annualized rate of 30% for the previous 10 years. Its forward yield currently stands at 2.5%, making it an ideal long-term buy.
Telus
After a challenging couple of years, Telus (TSX: T) has witnessed healthy buying over the last few weeks, with its stock price rising by 8.7% since the beginning of last month. Being in a capital-intensive business, interest rate cuts and expectations of further cuts have reignited interest in telecom stocks. Also, the company posted strong second-quarter earnings earlier this month, with a net addition of 332,000 customers across mobile and fixed lines. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by 5.6%, while its adjusted EBITDA margins expanded by 150 basis points to 38.2%. It also generated free cash flows of $478 million during the quarter.
The demand for telecommunication services could continue to rise amid the digitization of business processes. Given its expanding 5G and broadband infrastructure, Telus is well-positioned to benefit from the expanding addressable market. Moreover, the company has rewarded its shareholders by raising its dividends 26 times since 2011. The management also hopes to increase its dividends by 7-10% annually through 2025. Despite the recent uptrend, the company trades at a substantial discount compared to its 2022 highs. Its valuation looks attractive, with its NTM price-to-sales multiple at 1.6, thus making it an excellent buy right now.
WELL Health Technologies
My third pick is WELL Health Technologies (TSX: WELL), a tech-enabled healthcare company. Amid the weakness in the equity markets, the company has lost around 8% of its stock value this month, with its NTM price-to-sales multiple standing at 1.1. Moreover, the company’s long-term growth prospects look healthy amid growth in adopting virtual services, digitizing patient records, and increased usage of software services in the healthcare segment.
Meanwhile, the company is developing new innovative artificial intelligence-powered products, making strategic partnerships, and exploring acquisition opportunities that could support its growth. Further, it has implemented several cost optimization initiatives to improve operating efficiency and drive profitability. Considering all these factors, I believe WELL Health would be an excellent buy at these levels.
