The S&P/TSX Composite Index is up about 18% year to date and has gained nearly 30% over the past year. Although the benchmark index has been trending higher, shares of a few fundamentally strong companies continue to offer significant value near the current market price and are undervalued. This presents a buying-and-holding opportunity for investors with a long-term outlook. With this background, let’s look at undervalued Canadian stocks to buy now.
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WELL Health stock
Shares of the digital healthcare company WELL Health (TSX: WELL) are up about 13.5% year-to-date. Despite this notable increase, WELL Health stock is too cheap to ignore near the current market price. WELL Health stock trades at the next 12-month (NTM) enterprise value-to-sales (EV/Sales) ratio of 1.5, which is near its all-time low, offering significant value.
While WELL Health stock is trading cheap on the valuation, the digital healthcare company consistently delivers record sales, improves profitability, and leverages artificial intelligence (AI) to strengthen its competitive capabilities and deliver sustainable earnings growth.
WELL Health’s solid organic sales, led by momentum in omnichannel patient visits and benefits from strategic acquisitions, will likely boost its top-line growth. Further, its focus on improving operational efficiency, optimizing costs, and integrating digital workflows will cushion its bottom line. Moreover, the company’s launch of advanced AI tools like the ambient AI scribe will likely accelerate growth and provide a competitive edge.
The digital healthcare company is poised to deliver solid growth. Further, it is strengthening its balance sheet and reducing its debt, which positions it well to capitalize on high-growth opportunities. Overall, WELL Health stock offers a compelling combination of value and growth.
Lightspeed Commerce stock
Lightspeed Commerce (TSX: LSPD) is another Canadian stock that appears undervalued. The tech company offers a cloud-based commerce platform. Its stock is down about 25% year-to-date and has significantly underperformed the broader markets. Notably, macro uncertainty and fear of a slowdown in consumer spending have weighed its share price. Given the decline, Lightspeed stock trades at the NTM EV/sales multiple of 1.4, which is near the multi-year low.
Lightspeed stock appears attractive on the valuation front. At the same time, the tech company consistently reports strong revenue growth, witnesses increased payment adoption, and delivered improved profitability.
The company is poised to benefit from the ongoing digital shift. Demand for its digital and payment offerings will likely increase as more merchants modernize their point-of-sale (POS) platforms. Lightspeed’s payments penetration was 36% in the first quarter (Q1) of fiscal 205, up from 22% in the same quarter last year. Its growing payment penetration and efforts to control costs enable the company to significantly improve its profitability.
Further, Lightspeed’s focus on high Gross Transaction Volume (GTV) customers is paying off well. The high GTV customers adopt Lightspeed’s multiple modules, leading to higher customer retention, boosting average revenue per user (ARPU), and supporting margins.
In summary, Lightspeed’s compelling valuation, steady revenue growth, focus on high GTV customers, improving profitability, and strategic acquisitions provide a solid base for future growth.
