TSX stocks have been soaring in 2024. The S&P/TSX Composite Index is up 18% this year and the Index just hit a new record. Even though the Index has had a great rebound, bargains can still be found.
Here are three TSX stocks that may have a little fuzz. In some cases, there is a reason they are cheap. However, if you can look out past a year or two, they could be very good investments longer term.
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A misunderstood TSX mid-cap stock
The first TSX stock to contemplate is Calian Group (TSX: CGY). It operates in core business segments focused on healthcare, cybersecurity, training, and advanced technologies.
Traditionally, its largest customer has been the Canadian military. However, acquisitions over the past five years have significantly expanded its geographic and customer base.
Its stock is up 63% in the past five years. That beats the TSX Index. However, the stock is down 10.5% in 2024. That is despite the company delivering solid growth in 2024.
For the first nine months of its fiscal year, revenue is up 17% and adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) is up 38%. It has also generated over $40 million in cash flow.
Unfortunately, the Canadian military announced a major cut to its budget this year. On that news, the market got jitters and sold off Calian shares.
Despite this news, the company has been announcing plenty of recent major business awards. If it can continue its high-teens growth rate, this stock could be a bargain at 10.5 times earnings.
A TSX rebounding small cap stock
Sangoma Technologies (TSX: STC) is a small cap TSX stock that is misunderstood by the market. Sangoma is a provider of unified communications software to small and medium-sized businesses.
This stock had a huge run-up during the pandemic. However, after a few bad acquisitions (and several management missteps), STC stock fell as quickly as it rose.
Today, Sangoma has a new management team. The company is dialled in on streamlining its vast product portfolio. Likewise, it is ramping up a new focused sales approach. Sales and earnings growth could start to accelerate as we get into 2025.
In the past year, Sangoma has worked to rapidly deleverage its balance sheet. Today, it is sitting in a very sustainable position. Its business generates a tonne of excess cash to support future growth endeavours.
Despite rising 94% this year, Sangoma stock only trades for seven times free cash flow and six times EBITDA.
A blue-chip stock taking a temporary dip
If you are looking for a larger cap TSX stock in the mix, Alimentation Couche-Tard (TSX: ATD) is starting to look attractive. Its stock is down 11%, declining ever since it announced its desire to acquire the 7-11 convenience chain.
Yet, not much in the business has really changed since the announcement. Certainly, Couche-Tard is facing some macro headwinds and a temporary slowdown in demand. Fortunately, it has used the slowdown to sweep up some quality convenience businesses.
7-11 could also be one of them. While the chances are slim that the deal gets done, the acquisition would make Couche-Tard a global convenience empire. If any company could execute a turnaround at 7-11, it is Couche-Tard. The prospective deal could create a lot of value.
In the meantime, you can buy Couche-Tard at a reasonable valuation. Any further pullback could be an attractive opportunity to add in scale to this quality business.
