Despite the volatility, the Canadian equity markets are upbeat this year, with the S&P/TSX Composite Index rising 19.3%. Easing inflation, falling interest rates, and the post-election rally have boosted the Canadian equity market. However, the following three Canadian stocks have failed to participate in this uptrend and are trading at attractive valuations, making them enticing buys.
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Lightspeed Commerce
Supported by its solid second-quarter earnings and improvement in broader equity markets, Lightspeed Commerce (TSX:LSPD) has witnessed healthy buying over the last few months, with its stock price rising 47.2% compared to its September lows. Despite the surge, it trades at around an 85% discount compared to its 2021 highs. Also, its valuation looks reasonable, with its price-to-book and NTM (next 12 months) price-to-sales multiples at 1.1 and 2.1, respectively.
Meanwhile, the growing adoption of the omnichannel selling model has created long-term growth potential for Lightspeed. The company is also developing and launching new innovative products, which could continue to expand its customer base and average revenue per customer. Also, its unified POS and Payments offering has led to increased adoption of the Payments platform, thus driving its GPV (gross payments volume). Along with these growth initiatives, the company has adopted cost-reduction initiatives, which could improve its profitability. So, I expect the uptrend in Lightspeed’s financials and stock price to continue, thus making it an excellent buy.
Telus
Second on my list would be Telus (TSX:T), which has lost around 38% of its stock value compared to its 2022 highs. Higher interest rates and unfavourable policy changes have led to a sell-off in the telecom sector, including Telus. Meanwhile, Telus continues to expand its customer base by adding 347,000 customers in the recently reported third-quarter earnings. The company’s expanding 5G and PureFibre network coverage and strong demand led to the addition of new customers.
Meanwhile, the company’s revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew 1.9% and 5.6%, respectively. It also generated free cash flow of $561 million during the quarter, representing a 58% increase from the previous year. Higher EBITDA and a decline in capital expenditure boosted its free cash flows.
Moreover, the demand for telecommunication services is rising in this digitally connected world, thus expanding Telus’s addressable market. Given its expanding 5G and broadband infrastructure, the company is well-positioned to benefit from the rising demand for telecommunication services. Further, the company’s growth segments, TELUS Health, and TELUS Agriculture & Consumer Goods, continue to grow at a healthier rate, thus supporting its financial growth in the coming quarters.
Notably, Telus has been rewarding its shareholders through dividends and share repurchases. Since 2004, it has paid $21 billion in dividends and repurchased shares worth $5 billion. With a quarterly dividend of $0.4023/share, the company currently offers an attractive yield of 7.4%. Considering all these factors, I believe Telus would be an excellent buy for long-term investors despite the near-term volatility.
Cargojet
Third on my list would be Cargojet (TSX:CJT), which has underperformed the broader equity markets this year with returns of 7.3%. Its valuation looks attractive, with its NTM price-to-sales and price-to-earnings multiples at 1.9 and 20.7, respectively. Meanwhile, the company reported an impressive third-quarter performance, with its revenue growing by 14.8%. The growth in e-commerce and B2B volumes, price increases for contractual customers, additional aircraft deployment, and the starting of scheduled charter services between China and Canada boosted its topline.
Driven by its topline growth, the air cargo services provider’s adjusted EBITDA increased by 17.4%. It also generated $96.2 million of cash from its operating activities. Supported by its healthy cash flows, the company has repaid $106.9 million in debt in the first three quarters, thus lowering its net debt-to-adjusted EBITDA ratio to 2.2 compared to 2.6 at the beginning of this year. Moreover, I expect the uptrend in the its financials to continue amid improving market conditions due to easing inflation and falling interest rates. Also, the expanding e-commerce market offers promising long-term growth potential for the company, thus making it an ideal buy for long-term investors.
