With the equity markets trading at all-time highs, it might be challenging to identify undervalued stocks trading at a discount to their intrinsic value. In this article, I have shortlisted two cheap Canadian stocks trading under $20 to buy right now. Let’s see why.
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Endeavour Silver stock
Endeavour Silver (TSX: EDR) is a company valued at $1.6 billion by market cap. It is engaged in the acquisition, exploration, development, extraction, processing, refining, and reclamation of mineral properties in Mexico and Chile. It explores gold and silver deposits and other precious metals. Endeavour operates two mines in Mexico and is advancing two other exploration and development projects in the country.
Similar to other mining companies, the stock price of Endeavour Silver is tied to commodity prices. As prices of precious metals such as gold and silver have risen in the past year, EDR stock has gained over 20% since November 2023.
In Q3 2024, Endeavour’s silver production totalled 875,000 ounces, while gold production stood at 9,300 ounces. It is on track to end the year with a production of between 7.3 million and 7.6 million silver equivalent ounces.
Its revenue in Q3 stood at $53 million, up 8% year over year due to higher precious metal prices. Moreover, lower silver ounces sold in Q3 and a focus on cost management allowed the company to decrease its cost of sales by 12% year over year to $41 million.
Endeavour reported an adjusted net income of $1.6 million in Q3, compared to a loss of $8.3 million in the year-ago period.
Analysts tracking the TSX stock expect adjusted earnings to expand to $0.39 per share in 2025, up from $0.04 per share in 2023. So, priced at 16.8 times forward earnings, EDR stock is reasonably valued. Bay Street remains bullish and expects the mining stock to surge over 20% in the next 12 months.
Vecima Networks stock
Valued at a market cap of $483 million, Vecima Networks (TSX: VCM) provides technology solutions that enable network service providers and content providers to connect people and enterprises. It offers products for the cable and broadcast industries and has three primary segments, which are:
- Video and Broadband: The segment offers platforms and modules to process data from the cable network.
- Content Delivery and Storage: It offers solutions and software for industries and customers focusing on producing and streaming video content.
- Telematics: It provides information and analytics for fleet managers to manage their mobile and fixed assets.
Vecima Networks has increased its sales from $94.9 million in fiscal 2020 (ended in June) to $291 million in fiscal 2024. An asset-light business model has allowed the company to benefit from high operating leverage and economies of scale. In fiscal 2024, it reported an operating income of $30.4 million, up from $9.6 million in 2022.
After a sluggish performance in the last 12 months, Vecima is on track to increase sales to $370 million in fiscal 2025, with adjusted earnings per share of $1.23, up from $0.8 in 2024. Priced at 15.4 times forward earnings, VCM stock is cheap, given its strong growth forecast.
Notably, the company pays shareholders an annual dividend of $0.22 per share, which translates to a yield of 1.2%.
Given consensus price target estimates, analysts tracking VCM stock expect it to gain roughly 50% in the next 12 months.
