3 Beaten-Down Stocks That Could Take Off in a New Bull Market

Three beaten-down stocks could reverse course and take off if a bull market comes.

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The TSX has been resilient in 2024 despite a bumpy road. As of August 12, 2024, the index is up 6.9% year-to-date, or slightly better than the same period last year (+5.3%). However, some analysts see a vast improvement in the investment landscape as the Bank of Canada continues with its rate-cutting cycle.

Because of elevated market volatility, some stocks still underperform. Companies like Air Canada (TSX:AC), Doman Building Materials (TSX:DBM), and Wajax (TSX:WJX) are beaten down but could take off if a bull market comes.

Increased capacity

Market analysts covering Air Canada recommend a buy rating. Their 12-month average price target is $22.17, a 47.5% upside. At the current share price of $15.03, the airline stock is down 19.6% year-to-date. In Q2 2024, the operating revenue of Canada’s flag carrier increased by 2% to $5.5 billion versus Q2 2023.

Created with Highcharts 11.4.3Air Canada PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Unfortunately, operating expenses increased 9% to $5 billion, while net income dropped 51.1% year-over-year to $410 million. Nevertheless, Air Canada’s President and CEO, Michael Rousseau, said the quarterly results were solid but were short of internal expectations.

Cargo revenues rose 1% year-over-year due to higher volume and freighter revenues in the Americas. For 2024, Air Canada expects capacity to increase between 5.5% and 6.5% and Adjusted EBITDA to be $3.1 billion up to $3.4 billion.

Challenging period

Amar S. Doman, Board Chairman of Doman Building Materials, said, “We continued to tightly manage inventory levels and maintain a fairly robust gross margin level during what I would consider a challenging period in the industry.” At $6.33 per share, the construction stock is down 17.2% year-to-date. DBM paid a $0.14 per share quarterly dividend (2.2% yield) in Q2 2024.

Created with Highcharts 11.4.3Doman Building Materials Group PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

In Q2 2024 and the first half of 2024, net earnings fell 41.8% and 28.9% year-over-year to $17 million and $31.4 million, respectively. Also, in the three months ending June 30, 2024, Doman experienced lower average pricing and a slowdown in the construction materials market.

Mr. Doman added, “I am pleased with our financial performance during a period when we continue to operate in a market with significant volatility in general activity and lower average pricing when compared to the comparative period last year.” Market analysts recommend a buy rating and see a 35.3% average upside to $8.96 in one year.

Solid fundamentals

Wajax has delivered an overall return of 109.8% in five years, but its performance could be better in 2024. At $24.03 per share, current investors are down 18.7% year-to-date but partake in the 5.8% dividend. The $522.2 million operator of an integrated distribution system provides sales, parts, and services to customers in various sectors.

Created with Highcharts 11.4.3Wajax PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

In the first half of 2024, revenue and net earnings declined 4.7% and 24% year-over-year to $1 billion and $35.4 million, respectively. Management is confident the business will overcome the headwinds because of solid fundamentals in certain markets like energy and mining. Based on market analysts’ price target, the potential upside is 29%.

Wait for the bull market

Air Canada, Doman Building Materials, and Wajax have business strengths that could propel their stocks to soar in the next bull market.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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