While the broader Canadian index is trading near all-time highs, several quality stocks are hovering at 52-week lows. Two such TSX stocks you can buy at a discount in October 2024 include Alimentation Couche-Tard (TSX: ATD) and BRP (TSX: DOO).
Let’s see why.
Alimentation Couche-Tard has underperformed in 2024
Valued at $70 billion by market cap, Alimentation Couche-Tard operates and licenses convenience stores under brands such as Circle K, Couche-Tard, Ingo, Holiday, and Mac’s. With more than 12,000 convenience stores across North America, Europe, and Asia, Alimentation Couche-Tard is among the largest companies in Canada.
In the last three months, the stock has fallen by 10% after the company made a takeover offer to acquire Japan’s Seven&I for US$38 billion. The deal would be the largest-ever buyout of a Japanese entity by an overseas company. However, Seven&I rejected the initial proposal following which Alimentation Couche-Tard raised its bid to US$47 billion.
The ongoing pullback allows shareholders to buy a quality stock at a discount. In the last 20 years, ATD stock has returned more than 3,000% to shareholders. Moreover, it offers investors a forward dividend yield of almost 1%, and these payouts have risen by over 20% annually in the past five years.
Earlier this year, Alimentation Couche-Tard announced a definitive agreement to acquire GetGo Café Markets from Giant Eagle. GetGo is a food-first convenience store with 270 retail and fueling locations in the U.S.
Like other retail companies, ATD is wrestling with slower consumer spending, which it aims to offset by growing its loyalty membership program in the U.S. and Europe.
Priced at 18 times forward earnings, ATD stock trades at a reasonable valuation, given that earnings are forecast to rise by 8% in fiscal 2025 and 14% in 2026. Analysts remain bullish on the TSX stock and expect it to surge over 20% in the next 12 months.
Is BRP stock undervalued right now?
Valued at $5.6 billion by market cap, BRP designs, develops, manufactures, distributes, and markets power sports vehicles and marine products in Canada and internationally. Its sales increased from $6 billion in fiscal 2020 (ended in January) to $10.4 billion in fiscal 2024. However, in the last 12 months, its sales have fallen by almost 18% to $9 billion, driving the stock lower.
In fiscal Q2 2025, it reported revenue of $1.8 billion, down 34% year over year due to lower shipments. Its gross profits totalled $377 million, indicating a margin of 20.4%, which fell compared to last year due to lower production volumes and higher sales programs.
Amid a challenging macro environment, BRP reduced its inventory by 13% in the last two quarters and will reduce it by at least 15% by the end of fiscal 2025.
The company explained, “Market conditions were in line with our plan through April, but deteriorated in the second quarter. Although these conditions are impacting many of the regions where we operate, it has recently become more challenging in North America, our key powersport market.”
Analysts expect BRP stock’s earnings to fall from $11.11 per share in 2024 to $3.04 per share in 2025. However, the company’s bottom line is forecast to expand by 70%, valuing BRP at 15 times forward earnings.
Given consensus price target estimates, Bay Street expects the stock to gain over 15%.
