Buying stocks at a discount is like getting your favourite item on sale. Only the potential rewards can be even greater! For instance, studies have shown that over the long term, the S&P 500 has generated an average annual return of about 10%.
To put this into perspective, during the 2008 financial crisis, the S&P 500 dropped nearly 57% from its peak. Investors who had the nerve to buy during the downturn saw significant gains as the market rebounded. By 2013, the index had recovered and surpassed its previous high. Those who bought stocks at a discount during the downturn enjoyed substantial returns.
The key takeaway? Buying quality stocks at a discount can set you up for outsized gains when the market bounces back, turning short-term volatility into long-term wealth. And these could get you there.
Scotiabank
Bank of Nova Scotia (TSX:BNS) is currently looking like a stock that’s trading at a discount, and there are some compelling stats to back that up. For starters, BNS has a trailing price-to-earnings (P/E) ratio of just 10.73. This is lower than many of its peers in the banking sector. It suggests that the market may be undervaluing the stock relative to its earnings potential.
Additionally, the stock’s price-to-book (P/B) ratio sits at 1.12, indicating that it’s trading just slightly above its book value. For a bank with a strong track record like BNS, this could signal an opportunity to buy shares at a favourable price, especially when you consider the robust profitability with a profit margin of 26.43%.
Another reason BNS seems like a bargain is its attractive dividend yield. Currently offering a forward annual dividend yield of 6.55% as of writing, BNS provides one of the higher yields among Canadian banks. This is well above its five-year average yield of 5.57%, making it an appealing option for income-focused investors. BNS continues to generate solid revenue and maintain a healthy payout ratio of 70.55%. For investors looking for a stable, income-generating stock that might be trading below its intrinsic value, BNS could be a smart pick.
North West
North West Company (TSX:NWC) looks like it’s trading at a discount, and there are some interesting stats that make this clear. For starters, the stock’s forward P/E ratio is 13.76, which is lower than the trailing P/E of 16.45. This suggests that the market expects earnings growth ahead. This lower valuation relative to future earnings potential indicates that NWC could be undervalued at its current price. Additionally, the price-to-sales (P/S) ratio is just 0.88. This is quite low for a company with stable revenue streams like NWC.
Furthermore, NWC offers a solid dividend yield of 3.44%, slightly above its trailing yield. This indicates that the company is committed to rewarding shareholders. The stock’s payout ratio is a reasonable 55.96%, meaning there’s room for dividend growth or reinvestment into the business.
With a strong return on equity of 20.19% and quarterly earnings growth of 22.20% year over year, NWC is showing that it can deliver solid financial performance, even in a challenging market. All these factors combined suggest that NWC is trading at a discount, making it a potentially smart buy for those looking to add a reliable, dividend-paying stock to their portfolio.
Great-West
Great-West Lifeco (TSX:GWO) appears to be trading at a discount, and the numbers tell a pretty compelling story. With a trailing P/E ratio of 10.82 and a forward P/E of 9.98, the stock is priced attractively relative to its earnings. This suggests that the market might be underestimating its future growth potential. Additionally, its P/B ratio of 1.60 indicates that the stock is trading not too far above its book value.
Another reason GWO looks like a bargain is its solid dividend yield, which stands at 5.16%, comfortably higher than the five-year average yield of 5.48%. This generous payout is supported by a reasonable payout ratio of 54.08%, indicating the dividends are both sustainable and could grow in the future. Couple this with a quarterly earnings growth of 95.50% year over year and a return on equity of 13.21%, and it’s clear that GWO is delivering solid performance while still being undervalued by the market. This makes it quite a valuable opportunity.
