Despite the uncertain outlook due to rising geopolitical tensions and the impact of protectionist policies, the Canadian equity markets have witnessed healthy buying over the last few months, driving valuations of the Canadian companies higher. However, the following two Canadian stocks are still trading at more attractive valuations and offer compelling buying opportunities.
Telus
After a challenging couple of years, Canadian telecom companies are experiencing healthy demand this year, amid a low-interest-rate environment and rising demand for telecommunication services. Year to date, Telus (TSX:T) has witnessed a 20.7% increase in its stock price. Despite the recent increases, it still trades at a substantial discount compared to its 2022 highs. Also, its NTM (next-12-month) price-to-sales and NTM price-to-earnings multiples stand at 1.7 and 21.4, respectively, which look reasonable.
Furthermore, Telus plans to invest approximately $70 billion over the next five years to expand and enhance its network infrastructure and connectivity. Currently, it provides broadband connectivity to 3.5 million customers, while its 5G services cover 88% of the country’s population. These expansions could help in growing its customer base and driving its financials.
Additionally, its healthcare segment, Telus Health, continues to experience healthy growth through strategic investments, new product launches, and the expansion of its sales channels. It has also enhanced its profitability by effectively managing costs through the adoption of technological advancements and synergy optimization.
Meanwhile, Telus is working on lowering its leverage ratio to three by the end of 2027, with the ratio falling by 20 basis points in the second quarter to 3.7. It has also signed an agreement to sell 49.9% of the stake in its wireless tower infrastructure business to La Caisse for $1.26 billion, which could help in lowering its leverage further.
Notably, the Vancouver-based telecom company has rewarded its shareholders by increasing its dividend 28 times since initiating its dividend growth program in May 2011. Its forward dividend yield currently stands at a healthy 7.34%. Considering all these factors, I believe Telus would be an excellent buy at these levels.
WELL Health Technologies
Another undervalued Canadian stock that I am bullish on is WELL Health Technologies (TSX:WELL), which has lost over 32% of its stock value this year. Investor skepticism has grown amid the ongoing investigation into the billing practices of its subsidiary, Circle Medical, resulting in a significant correction. The selloff has dragged its valuation down, with the company currently trading at 0.8 and 11 times analysts’ projected sales and earnings for the next four quarters, respectively.
Meanwhile, the Vancouver-based healthtech company reported a solid second-quarter performance last month, with its top line and adjusted earnings before interest, taxes, depreciation, and amortization growing by 57% and 231%, respectively.
Further, the digitization of clinical procedures and the growing adoption of virtual services have created long-term growth potential for WELL Health. Meanwhile, the company continues to invest in artificial intelligence to develop innovative products, which could help in expanding its market share. Additionally, the company continues to expand its business through strategic acquisitions. After completing 14 acquisitions this year as of August 14, the company had signed 15 letters of intent, which can increase its annualized revenue by $134 million. Therefore, its growth prospects look healthy.
