In this piece, we’ll check out three stocks that still look quite fairly priced to slightly undervalued. While stocks have been on a bit of a run in this past month, I still think there are opportunities that might be able to run even if the market momentum starts to slow.
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Loblaw
Shares of Loblaw (TSX: L) look like an intriguing buy now that shares are right back to the $62 level of support. Of course, Loblaw stock has gotten quite expensive over the years. It used to be that the grocery would go for a price-to-earnings (P/E) multiple in the teens. Nowadays, it commands quite a growth multiple. Today, the stock goes for 29.4 times trailing P/E. That’s rich, to say the least.
But given Loblaw’s exceptional ability to execute and its expansion plan that could offer more value to a growing number of Canadians as food inflation takes off again, perhaps the name isn’t as expensive as it seems, given where its growth profile could be headed. The name’s in expansion mode and as food inflation heats up above 3% (look for transport costs to work their way into higher prices at the grocery store), it’ll continue to take market share in an industry that’s become really tough to stay ahead in.
Given the superb managers and the growth prospects, I’d say L stock is a growth stock worth sticking with, especially if a dip below $56 is in the cards. Finally, the 0.91% dividend yield might not seem like much, but given the cash flow trajectory, I’d say the dividend could make a big difference for long-term thinkers.
Aritzia
Up next, we have Aritzia (TSX: ATZ), a $16.35 billion Vancouver-based clothing retailer that recently spiked to hit new all-time highs of more than $141 per share. The growth story is unbelievable, and if you can handle the added volatility (1.67 beta), I think it makes sense to hang in.
The U.S. growth runway is seriously impressive, as is management’s ability to drive brand affinity. Even as consumers become more challenged, Aritzia has what it takes to keep defying the odds. Make no mistake, it’s hard to be in apparel these days unless, of course, you’re Aritzia. The magic formula, I think, warrants the forward P/E of around 35.0 times.
Who knows? Aritiza might even surpass Lululemon in market cap come a year’s time.
Restaurant Brands International
Restaurant Brands International (TSX: QSR) soared over 3% on Thursday, fuelling an impressive breakout that’s been years in the making. Now over $111 per share, QSR stock trades at 31.0 times trailing P/E.
With a nice 3.34% dividend yield and solid momentum behind Burger King (the new Whopper is a share-taker, in my opinion) as well as potential behind Tim Hortons and Popeyes Louisiana Kitchen, I think the name is finally worth topping up, as there’s no telling how high the breakout could take the fast-food icon as the firm finally finds the right growth formula. With a low 0.53 beta and a good dividend growth pace, I think it’s finally time to buy.
