The S&P/TSX Composite Index jumped nearly 26% over the past year, reflecting momentum in several Canadian stocks. While most TSX stocks have trended higher, shares of a few fundamentally strong companies still appear to be undervalued, offering a solid buying opportunity for long-term investors. So, if you plan to invest $500, here are three no-brainer undervalued stocks to buy right now.
goeasy stock
Shares of financial services company goeasy (TSX: GSY) have gained over 78% in one year. While it has registered a notable gain, goeasy stock is still undervalued on the valuation front.
It’s worth noting that goeasy, which provides lending services to subprime borrowers in Canada, has consistently increased its sales and earnings at a double-digit rate. For instance, its earnings per share (EPS) has grown at a compound annual growth rate of over 28% in the last five years. While the momentum in its earnings will likely sustain, goeasy stock trades at a next-12-month (NTM) price-to-earnings (P/E) ratio of just 9.8, implying it is significantly undervalued.
goeasy is poised to benefit from its dominance in the large subprime lending sector. In addition, its diverse product offerings, geographical expansion, omnichannel offerings, and multiple funding sources will drive its revenues. Thanks to the higher revenues, steady credit performance, and operating efficiency, goeasy’s bottom line could continue to increase at a solid double-digit rate. Moreover, the financial services company could continue to reward its shareholders with higher dividends.
WELL Health stock
Shares of WELL Health Technologies (TSX: WELL), a digital healthcare company, are trading cheap on the valuation front. Notably, WELL Health stock trades at an NTM enterprise value-to-sales (EV/sales) multiple of 1.4, which is well below its historical average and near the multi-year low.
While WELL Health stock appears undervalued, the company continues to grow its sales rapidly. Moreover, it focuses on increasing cash flows, lowering debt, improving leverage, and reducing share issuances to enhance its shareholders’ value.
WELL Health’s top line jumped 42% year over year in the second quarter (Q2) of 2024, reflecting an acceleration in organ revenue and contribution from its recent acquisitions. It’s worth noting that WELL Health has reported record revenues for 22 consecutive quarters, reflecting solid demand for its offerings. Moreover, WELL Health’s management expects the momentum to sustain and forecasts achieving $1 billion in annual revenue by the end of 2024.
The digital healthcare company is also focused on enhancing profitability and capital efficiency. Moreover, its healthy cash flows position it well to fund acquisitions and invest in artificial intelligence (AI) capabilities to accelerate growth.
Lightspeed stock
Lightspeed (TSX: LSPD) stock is too cheap to ignore near the current price levels. This Canadian technology company offers digital payment and omnichannel commerce solutions and is poised to benefit from the shift towards multi-channel selling platforms. However, its stock is under pressure due to the uncertain macro environment and pressure on consumers’ discretionary spending.
Given the correction in its price, Lightspeed trades at an NTM EV/Sales ratio of 1.6, significantly lower than its historical metric.
Moreover, Lightspeed aims to grow its customer base, focusing on high-value clients to drive product adoption, boost average revenue per user, improve margins, and enhance customer retention. The company has shown improvement on the bottom line front and managed to cut losses.
Barring near-term volatility, Lightspeed’s solid growth prospects and current valuation suggest it could be a solid long-term investment.
