New investors are often worried about investing in the stock market during harsh economic environments. The last few years saw several high-quality TSX stocks decline to significantly lower share prices. After the recent interest rate cuts announced by the Bank of Canada, the situation is changing for the better in the stock market.
Lower interest rates effectively boost the stock market. With borrowing costs lower, consumers have more money to spend. Besides attracting more business for consumer-facing businesses, lower rates also mean lower borrowing expenses that publicly traded companies often rely on.
Reduced financial pressure can improve profitability, helping these companies offer more value to shareholders. With prospects of better performances, investors become more amenable to paying a premium for high-quality stocks, increasing share prices further. Here are three TSX stocks trading below $50 that might not stay at these levels too long.
Aritzia
Aritzia (TSX: ATZ) is a company that has performed well over the years but stands to benefit a lot from the changing economic environment. Discretionary spending is one of the first things to go when consumers face higher living costs. Aritzia is a $5.33 billion market capitalization company headquartered in Vancouver that makes what can be called “Everyday Luxury” apparel and accessories.
Its recent focus on expanding omnichannel offerings, growing its presence in the U.S., and the interest rate cuts will likely combine to improve things for the company. In the last five years, it has already seen its share prices grow by 171%, along with double-digit growth in its revenue and adjusted net income.
With the backdrop of improved market conditions, it might be in for significant upside in the coming quarters. As of this writing, ATZ stock trades for $47.32 per share, around 20% below its 2022 all-time high.
WELL Health Technologies
WELL Health Technologies (TSX: WELL) is one of the businesses that came into the limelight during the pandemic. The $1.09 billion market capitalization healthcare tech company is the largest telehealth provider in the country. Headquartered in Vancouver, the company leveraged its growing popularity and revenue during the pandemic to diversify its business.
WELL Health has become Canada’s largest owner and operator of outpatient health clinics. It also owns and operates primary healthcare facilities in Canada and the U.S. and provides EMR services to doctors and clinics in Canada.
The company has consistently grown revenues and, more recently, its profitability. However, its share prices have declined since the pandemic ended. The market will eventually realize its intrinsic value, and share prices will likely soar. As of this writing, it trades for $4.38 per share.
Lightspeed Commerce
Lightspeed Commerce (TSX: LSPD) is a battered and bruised tech stock. The $2.71 billion market capitalization point-of-sale and e-commerce software provider headquartered in Montreal leveraged the boom in the Canadian tech industry to soar to great heights.
As quickly as it rose, the tech sector meltdown, combined with short-seller reports, saw it fall far from grace. After going as high as almost $160 per share in September 2021, the stock trades for $17.88 per share at the time of writing. Despite its performance on the stock market, the underlying company has strong fundamentals and is well-positioned to benefit from a shift toward multichannel selling platforms.
Lightspeed keeps churning out new products that can see demand grow as businesses upgrade from traditional payment systems to advanced technology.
Foolish takeaway
As of this writing, the S&P/TSX Composite Index is hovering around new all-time highs, up by a massive 26.67% from its 52-week low. As the Canadian benchmark index suggests, several high-quality stocks have already recovered. Fortunately, a few top stocks still lag behind the rest and trade at more reasonable levels right now.
Investing in these arguably undervalued stocks while prices remain low can be an excellent way to get outsized long-term returns as a stock market investor. ATZ stock, WELL stock, and LSPD stock can be excellent investments to consider for this purpose.
