Although the S&P/TSX Composite Index rose 0.46% yesterday, the uncertainty over the impact of the trade war still persists. So, investors should be careful while investing through their TFSA (tax-free savings account), as a decline in stock prices and subsequent selling could lead to capital erosion and lower TFSA contribution room. Against this backdrop, let’s look at three value stocks that are excellent additions to your TFSA in this uncertain outlook.
Source: Getty Images
goeasy
goeasy (TSX: GSY), which has lost around 24% of its stock value compared to its 52-week high, is my first pick. Amid the recent correction, the company’s valuation looks attractive, with its NTM (next 12 months) price-to-earnings multiple standing at 7.9. Moreover, the company continues to expand its loan portfolio through its expanded product offerings, development of new distribution channels, risk-based pricing to lower borrowing expenses, and extending relationships with its customers. Further, the company recently raised US$400 million by issuing unsecured notes, thus raising its funding capacity to $2.2 billion and supporting its organic growth plans.
The Bank of Canada has cut its benchmark interest rates seven times over the last nine months, lowering its benchmark interest rates by 225 basis points. Falling interest rates could boost economic activities, thus driving credit demand and benefiting goeasy. Meanwhile, the subprime lender projects its loan portfolio to grow by 64% in the next three years while expanding its topline at an 11.4% CAGR (compound annual growth rate). Also, its operating margin could improve from 40% in 2024 to 43% in 2027. Considering its growth prospects and discounted stock price, I am bullish on goeasy. Moreover, the company has increased its dividends at a healthier rate for the last 11 years and currently offers a forward dividend yield of 3.7%.
Canadian Natural Resources
Another value stock that I am bullish on is Canadian Natural Resources (TSX: CNQ), which trades at a reasonable NTM price-to-earnings multiple of 11.5. The oil and natural gas producer operates a diversified, balanced asset base. Given its large, low-risk, high-value reserves, effective and efficient operations, and lower maintenance, the company enjoys a lower breakeven price and healthy cash flows.
These healthy cash flows have allowed CNQ to reward its shareholders with consistent dividend growth and share repurchases. The company has raised its dividends for 25 consecutive years at an annualized rate of 21%. Its forward dividend yield stands at 5% as of the April 1 closing price.
Moreover, CNQ continues to strengthen its production capabilities through its $6.2 billion investment. It expects to drill 279 crude oil wells and 361 conventional E&P (exploration and production) wells this year. The company’s management projects its average production in 2025 will be between 1,510 and 1,555 thousand barrels of oil equivalent per day, with the midpoint representing 4.2% growth from the previous year. These growth initiatives could continue to drive its financials, thus allowing it to maintain dividend growth.
WELL Health Technologies
My final pick is WELL Health Technologies (TSX: WELL), which has lost around 37% of its stock value year-to-date. The delay in filing its audited financials for the fiscal year 2024 amid the ongoing investigation of its subsidiary Circle Medical Technologies’ billing practices appears to have made investors skeptical, leading to a pullback. However, WELL Health’s management has stated that the resolution of this matter will not substantially impact its cash position and available resources.
Moreover, the company recorded 5.7 million patient visits last year, representing 32% year-over-year growth. Solid organic growth of 30% boosted its patient visits. Further, WELL Health intends to exercise its option to increase its stake in Healwell AI after Healwell AI acquires Orion Health. WELL Health is also expanding its footprint and has acquired 18 assets since December, which could contribute $130 million to its annual revenue. Further, the company is evaluating 34 opportunities that can contribute around $450 million to its annual revenue. Considering its growth prospects and discounted stock price, I expect WELL Health to deliver superior returns over the next three years.
