The Canadian equity markets have seen strong buying momentum in recent months, with the S&P/TSX Composite Index climbing 36.2% from its April lows. Healthy quarterly performances and interest rate cuts appear to have increased investors’ sentiments, driving equity markets higher. Year to date, the index is up by 22.4%.
However, the following two Canadian stocks have trailed the broader market due to multiple factors. Let’s analyze their fundamentals, growth outlook, and valuations to evaluate if they offer compelling buying opportunities at current levels.
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WELL Health Technologies
WELL Health Technologies (TSX:WELL), a digital healthcare company, has been under pressure this year, losing 15.9% of its stock value. The ongoing probe into the billing practices of its subsidiary, Circle Medical, has weighed on investor sentiment, leading to a sharp correction in the stock. However, the company reported an impressive second-quarter performance in August, with its revenue and adjusted net income growing by 56.9% and 529.3%, respectively. Along with organic growth, the strategic acquisitions completed over the previous 12 months have boosted its financials.
Meanwhile, the rising adoption of telehealth services and the continued digitization of clinical workflows have opened significant long-term growth opportunities for WELL Health. Moreover, the company is expanding its product offerings through the launch of innovative and artificial intelligence (AI)-powered products, which could strengthen its market share. It is also continuing with its inorganic growth and has signed letters of intent to acquire 15 assets as of August 14, which can contribute $134 million to its annualized revenue. Considering all these factors, I believe WELL Health’s growth prospects look healthy.
Meanwhile, the recent selloff has dragged its valuation down to attractive levels, with its NTM (next-12-month) price-to-earnings multiple at 13.7. Given its strong fundamentals, promising growth outlook, and attractive valuation, I believe WELL Health presents a compelling buying opportunity at current levels.
goeasy
goeasy (TSX:GSY), a subprime lender, has been under pressure since Jehoshaphat Research published its report on September 23. The report blamed goeasy for improperly delaying the reporting of its credit losses and suppressing delinquencies. Although goeasy has refuted these allegations, its stock has declined more than 12% since the report’s release and is down 1.3% year to date. On the back of this pullback, the company currently trades at NTM price-to-sales and NTM price-to-earnings multiples of 1.4 and 7.9, respectively.
Moreover, goeasy continues to expand its loan portfolio, generating $1.58 billion in loan origination in the first two quarters of this year, bringing the total to $5.1 billion. The Canadian subprime lending market has grown at 4.2% since 2021, reaching $231 billion in 2024. Currently, the company has acquired just 2% of the market share. Therefore, it has a substantial scope for expansion. With its broadened product portfolio, strategic initiatives, and growing market penetration, the company is well-positioned to strengthen its market share. Meanwhile, the company’s management expects its loan portfolio to grow 48% from its current levels to $7.55 billion (midpoint of its guidance) by the end of 2027.
Amid these expansions, the management hopes to grow its top line at 11.4% CAGR (compound annual growth rate), while improving its operating margin to 43%. Also, goeasy has rewarded its shareholders by raising its dividend at an impressive CAGR of 29.5% for the previous 11 years and currently offers a healthy dividend yield of 3.65%. Considering all these factors, I believe goeasy could deliver superior returns in the long term.
