The S&P/TSX Composite Index, also regarded as the benchmark for the Canadian stock market, has been rising amid easing concerns about a macroeconomic slowdown and interest rate cuts. While many stocks on the TSX have surged, several hidden gems continue to trade at attractive valuations, presenting a compelling opportunity for investors to consider.
Against this backdrop, here are a few hidden gems that remain cheap and have solid growth potential.
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goeasy stock
goeasy (TSX: GSY) is one of the top TSX stocks to buy now for its attractive valuation. Despite its impressive track record of solid growth and strong fundamentals, the market is undervaluing this Canadian financial services company. Currently, its shares trade at a next 12-month price-to-earnings (P/E) multiple of around eight, a level that suggests it could be a hidden gem, especially when you consider its potential for sustained earnings growth in the double digits.
goeasy operates in the subprime lending space and has proven its ability to thrive in this niche. Over the past five years, the company’s sales have grown at a compound annual growth rate (CAGR) of more than 19%. Moreover, its earnings have increased at a CAGR of nearly 26%, outpacing revenue growth.
That upward momentum has been reflected in its stock price, which has surged more than 212% over the last five years. Moreover, its solid profitability has driven a consistent increase in its dividend. goeasy has paid a dividend every year for the past 21 years and has increased it for 11 consecutive years, making it a dependable income stock.
goeasy’s dominance in Canada’s subprime lending market, expansion of its consumer loan portfolio, diversified funding sources, and solid underwriting practices position it well to scale rapidly while maintaining profitability.
In summary, goeasy offers a compelling mix of value, growth, and income. Its low valuation, strong earnings trajectory, and consistent shareholder returns make it a top pick for creating wealth.
WELL Health
Investors seeking a high-quality stock with an attractive valuation could consider WELL Health Technologies (TSX: WELL). This digital healthcare company has been performing well, led by steady demand for its omnichannel patient care services. Moreover, its strategic acquisitions have accelerated its growth and broadened its footprint.
Despite its solid operational performance, WELL Health’s stock appears significantly undervalued. Currently, it trades at a near-historical low NTM enterprise value-to-sales ratio of just one. This discounted valuation presents a compelling opportunity for investors.
WELL Health’s growth story shows no signs of slowing down. Besides organic growth, WELL Health will benefit from its acquisitions. The company recently acquired a stake in HEALWELL AI, which will enhance its scale. Moreover, it remains focused on expanding its footprint in Canada, particularly in its patient care and technology services segments.
Operationally, WELL Health continues to streamline operations to improve profitability. Moreover, it is strengthening its financial position by reducing debt. Furthermore, WELL Health’s focus on minimizing share dilution is a positive aspect.
Given its solid growth, improving fundamentals, and attractively low valuation, WELL Health Technologies offers a combination of growth and value.
