The S&P/TSX Composite Index has trended higher over the past year, generating a 21% return. While the Canadian benchmark index has steadily grown, shares of a few fundamentally strong companies still seem undervalued, presenting a great buying opportunity – particularly for long-term investors. Against this backdrop, let’s explore five undervalued Canadian stocks worth buying right now.
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WELL Health stock
Shares of the leading digital healthcare company WELL Health (TSX: WELL) are too attractive to ignore near the current price levels. Its stock is trading at the next 12-month (NTM) enterprise value-to-sales (EV/Sales) multiple of 1.5, which is near the multi-year low. While its stock is trading cheap, the company continues to deliver solid financials and strengthen its artificial intelligence (AI) capabilities to accelerate growth.
WELL’s Canadian Clinics business continues to deliver solid growth, led by the acquisitions and absorption of companies. Meanwhile, with a large addressable market and a robust pipeline of additional targets, WELL continues to see a compelling opportunity to allocate incremental capital into its Canadian clinic Business unit, which will boost its revenues and support overall financials.
Moreover, its omnichannel business model, predictable revenue, strong cash flow generating capabilities, and investments in AI to develop innovative clinical products augur well for growth.
goeasy stock
goeasy (TSX: GSY) stock is up about 65% over the past year. However, it still seems undervalued, offering potential for further growth. Currently, the stock trades at an NTM price-to-earnings (P/E) ratio of just 9.6. This is notably low, especially when you factor in the company’s high double-digit earnings per share (EPS) growth and a decent dividend yield of 2.6%.
goeasy, a leading player in Canada’s subprime lending market, is poised to continue its strong performance. Its geographical expansion, omnichannel offerings, diverse funding sources, and solid credit underwriting capabilities will likely drive double-digit growth in both revenue and earnings. Further, goeasy will likely enhance its shareholder value through higher dividend payouts.
Payfare stock
Investors could consider adding shares of financial technology company Payfare(TSX: PAY). It provides digital banking, instant payments, and loyalty-rewards solutions to the gig economy workforce. While Payfare stock has trended higher year-to-date, it looks undervalued near the current levels. It is trading at an NTM EV/Sales multiple of 1.2, which is at a multi-year low.
While Payfare’s valuation appears attractive, the stock will likely trend higher, given its consistent growth in revenue and active user base. In the second quarter (Q2) of 2024, its active user base jumped 24% year-over-year, while its top line jumped 20%.
Payfare’s partnerships with major food delivery and ride-sharing platforms, user growth, low customer acquisition costs, recurring revenue stream, and an asset-light business model provide a strong foundation for future growth.
BCE stock
Trading at an NTM P/E multiple of 15.9, shares of Canada’s leading communication company, BCE (TSX: BCE), are an attractive investment. The company’s focus on improving profitability through efficient subscriber growth and cost reductions positions it well to deliver solid earnings and enhance shareholder value through higher dividend payments.
Besides offering regular income and high yield, BCE is poised to deliver stellar capital gains led by its growing subscriber base, expansion of its fibre network and fast mobile 5G service, and momentum in its high-growth businesses, including digital ad, cloud computing, and security services. Overall, BCE stock offers value, income, and growth.
Alimentation Couche-Tard stock
Alimentation Couche-Tard(TSX: ATD) provides stability, growth, and income. Moreover, its stock is trading at an NTM P/E ratio of 18.3, which is low considering its double-digit earnings growth. Moreover, Couche-Tard stock is trading cheaper than Dollarama and Loblaw. While the stock is trading at a lower multiple than its peers, it consistently grows its revenue and earnings due to the solid momentum in its business and acquisitions.
The convenience store operator will likely benefit from its defensive business model, strategic pricing, and acquisitions, which will expand its store base and accelerate its growth. Further, ATD’s low operating costs will cushion earnings and cash flows. Also, its solid balance sheet positions it well to capitalize on growth opportunities.
