Financial Insights That Matter
Written by Sneha Nahata at The Motley Fool Canada
The stock market feels the heat as macroeconomic uncertainty and worries over U.S.-Canada trade tariffs weigh on investor sentiment. With volatility on the rise, the recent selloff has pushed several high-quality Canadian stocks into undervalued territory, creating a potential buying opportunity for those with a long-term outlook.
Despite the market pressure, certain companies with strong fundamentals remain well-positioned for future growth. These stocks, now trading at attractive levels, offer investors a chance to buy and hold for significant upside potential.
Against this background, here are my top three undervalued stocks to buy right now.
Shares of the Canadian subprime lender goeasy (TSX:GSY) look highly attractive near the current price levels. The financial services company is growing rapidly, delivering double-digit top and bottom-line growth over the past several years. Additionally, goeasy has a track record of consistently increasing its dividends over the last 11 years, making it a compelling income stock. Despite these strong fundamentals, the stock is undervalued, representing a buying opportunity.
Over the past five years, goeasy’s top line increased at a compound annual growth rate (CAGR) of over 20%. Meanwhile, its earnings per share (EPS) sports a CAGR of 28% during the same period. Thanks to its impressive financials, goeasy stock has gained over 240%, growing at a CAGR of 27.7% during this period.
Recently, goeasy stock has experienced a modest pullback, down approximately 10.7% year to date. This decline has positioned the stock with an attractive next-12-month (NTM) price-to-earnings (P/E) ratio of 7.5, well below its historical average. This valuation appears particularly compelling given goeasy’s double-digit earnings growth rate, a solid dividend yield of 3.9%, and a return on equity (ROE) exceeding 26%.
While goeasy stock is undervalued, the company is poised to deliver solid growth. The financial services company will benefit from its leadership in Canada’s non-prime lending sector. Moreover, its expanding consumer loan portfolio and solid credit underwriting capabilities augur well for future earnings and dividend growth. Overall, goeasy will likely deliver solid financial performance, driving its stock price higher.
For investors hunting for undervalued stocks, Lightspeed (TSX:LSPD) might be too cheap to ignore. This cloud-based commerce platform has seen its stock take a hit due to ongoing macroeconomic uncertainties. Adding to the pressure, the company recently announced the conclusion of its strategic review, deciding to remain publicly traded rather than go private. This decision didn’t sit well with the market, triggering a significant drop in share price.
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