Despite the selloff over the last two trading days, the S&P/TSX Composite Index is up 20.7%. Interest rate cuts and improving quarterly performances from Canadian companies have supported stock price growth. However, the following two under-$20 Canadian stocks have underperformed the broader equity markets and are available at attractive valuations, making them excellent buys.
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WELL Health Technologies
WELL Health Technologies (TSX:WELL) is a digital healthcare company that develops innovative technologies and solutions to empower healthcare practitioners in delivering better patient outcomes. The company has faced significant pressure this year, with its stock declining over 24% amid an ongoing investigation into the billing practices of its subsidiary, Circle Medical.
However, the Vancouver-based company reported a healthy second-quarter performance in August, with its revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) growing by 57% and 231%, respectively. The acquisitions over the last 12 months and organic growth boosted its financials. Meanwhile, its adjusted net income stood at $25.8 million or $0.10/share, representing a 400% increase from the previous year’s quarter.
Moreover, the growing popularity of virtual healthcare services and the digitization of clinical procedures have created a long-term growth potential for WELL Health. Additionally, the company is developing and introducing innovative products, including those powered by artificial intelligence, to strengthen its market share. Along with these growth initiatives, the company is also focusing on inorganic growth and has signed letters of intent to acquire 15 assets, which can contribute $134 million to its annualized revenue.
Despite its healthy growth prospects, the company currently trades at an attractive NTM (next-12-month) price-to-sales and NTM price-to-earnings multiples of 0.9 and 12.4, respectively. Considering its solid underlying business, robust growth prospects, and cheaper valuation, I believe WELL Health will deliver superior returns over the next three years.
Lightspeed Commerce
Another Canadian stock trading under $20 that has come under pressure is Lightspeed Commerce (TSX:LSPD), which has declined by about 29.5% so far this year. In addition to rising competition and a challenging macro environment, the company’s unsuccessful attempt to secure a sale during its strategic review process has dampened investor sentiment, pushing its stock price lower. Amid the steep pullback, the company’s NTM price-to-sales and NTM price-to-earnings multiples have declined to 1.2 and 21.5, respectively.
Meanwhile, Lightspeed had reported a reasonable first-quarter performance of fiscal 2026 in July, with its topline growing by 15%. Along with the expansion of its customer base and increased average revenue per user, the growth in gross payment and gross transaction values boosted its top line. Its adjusted EBITDA also grew 55.9% to $15.9 million, while cash flows from operating activities stood at $12.4 million compared to $14.2 million of cash usage in the previous year’s quarter. At the end of the quarter, it had cash and cash equivalents of $447.6 million, making it well-equipped to fund its growth initiatives.
Moreover, the growth in e-commerce has expanded the addressable market for Lightspeed. The company has broadened its product portfolio to enhance customer experience and expanded the reach of its payment solutions, which could drive its financial growth in the years ahead. The company is also utilizing artificial intelligence to improve productivity, thereby driving its productivity. Amid these growth prospects, the company’s management expects its gross profit and adjusted EBITDA to grow at an annualized rate of 15-18% and 35%, respectively, for the next three years. Considering all these factors, I am bullish on Lightspeed at these levels.
