What exactly is a cheap growth stock? A stock is considered dirt cheap on the TSX when its price is significantly lower than its intrinsic value. This is often reflected in key valuation metrics like a low price-to-earnings (P/E) ratio or a bargain price-to-book (P/B) ratio compared to its peers. Essentially, when the market seems to overlook a company’s potential and its price doesn’t reflect its true worth, that’s when it’s time to grab those cheap growth stocks! So, let’s look at some to consider.
Source: Getty Images
Brookfield Renewable
Brookfield Renewable Partners (TSX: BEP.UN) is still considered dirt cheap, especially given its impressive market cap of around $9.42 billion and a forward-looking strategy that positions it for substantial future growth. Despite a slight decline of 1.67% over the past year, the company has reported strong performance in its key sectors—notably a 9% increase in funds from operations (FFO) in the latest quarter. The stock trades at a low price-to-sales ratio of 1.31 and a P/B ratio of 1.73—indicating that it may be undervalued compared to its true potential.
A great opportunity lies in Brookfield’s ambitious growth plans and strategic investments, including a commitment of $8.6 billion across various renewable projects. The company is not only focused on traditional energy sources but is also branching into battery storage solutions. With the expected addition of approximately 7,000 megawatts of new capacity this year, coupled with the acquisition of significant stakes in companies like Neoen, Brookfield is enhancing its market position in fast-growing regions—thus ensuring a diversified cash flow that can lead to greater returns for investors.
Moreover, Brookfield’s strong balance sheet and liquidity of approximately $4.4 billion offer the flexibility needed to capitalize on emerging opportunities while reducing net debt. The commitment to a sustainable dividend of $0.355 per unit, with annual increases targeted at 5-9%, further underscores the company’s dedication. As demand for renewable energy continues to rise, Brookfield Renewable Partners stands at the forefront of this transition. This makes it an appealing investment for those looking to tap into the growth potential of clean energy while benefiting from a reliable income stream!
Sienna Senior Living
Sienna Senior Living (TSX: SIA) is still considered dirt cheap—especially when you look at its impressive growth potential and recent financial performance. With a market cap of about $1.28 billion, Sienna is making waves in the long-term care and retirement sectors. This includes recording a staggering 18.5% increase in same-property net operating income (NOI) over the last year. This upward momentum indicates that the company is effectively capitalizing on rising demand for senior care services—especially coupled with a solid 10.7% increase in total adjusted revenue in the most recent quarter. Despite a trailing P/E ratio of 39.79 and a P/B ratio of 3.50, Sienna’s ability to consistently grow its earnings makes it an attractive investment opportunity.
What truly sets Sienna apart is its strategic initiatives and strong financial position. These have paved the way for sustained growth. The recent government funding increase in Ontario has provided a significant boost to the long-term care segment. At the same time, occupancy rates in the retirement segment are steadily climbing. With an occupancy rate increase of 180 basis points to 88.6%, Sienna is clearly working hard to meet the needs of an aging population. The company has also maintained a healthy liquidity position of $296.5 million. Thus allowing it to navigate economic challenges while continuing to invest in expansion and enhancements to its services.
Lastly, Sienna’s attractive forward annual dividend yield of 6.03% presents a compelling case for income-focused investors. Even with a high payout ratio of 240%, the company is showing signs of improvement. Plus, its adjusted funds from operations payout ratio dropped to 76.2% in the second quarter of 2024 from 87.3% a year prior. This indicates that Sienna is on the right path to managing its capital more effectively while still rewarding shareholders. The company holds a strong growth trajectory, robust financial health, and a commitment to improving care for seniors. Therefore, Sienna Senior Living is not just a dirt-cheap stock. It’s an excellent opportunity for investors looking to capitalize on the growing demand for senior care services!
