Are Any of These Bargain Basement TSX Stocks Worth Buying?

Are Transcontinental Inc. (TSX:TCL.A) or two other undervalued Canadian stocks worth taking a chance on?

| More on:

Trawling through the lists of possibly undervalued stocks, the following three TSX index tickers display some deep discounts against their projected cash flow values, as well as some low multiples. But are they a buy? Let’s review the data and check what their track records look like, as well as any trailing dividend yields that might be calculable.

Transcontinental (TSX:TCL.A)

A common sight on the possibly undervalued Canadian stock lists, Transcontinental saw a one-year past earnings growth of 1% just about outperform a gloomy commercial services average of -2.9%. However, a hard year has only put a dink in an otherwise positive five-year average past earnings growth of 31.2%.

Moving on to valuation, we can see a low P/E of 8 times earnings matched with a P/B ratio of 1.1 times book, showing that in terms of assets you’d be getting good value for money. What value investors would be stacking shares of Transcontinental for is a dividend yield of 4.04%. However, with a high debt level of 89.4% of net worth and low 0.8% expected annual growth in earnings, it’s not for the risk-averse or for those looking for one- to three-year growth in their dividends.

Equitable Group (TSX:EQB)

A discount of 41% against the future cash flow value marks Equitable Group as a bargain basement stock worth a closer look. Take a one-year past earnings growth of 2.6% that underperforms the industry by about 80% if you want an idea of a recent track record, though overall, it outperforms a five-year industry average of 8.4% with its own 12.7%.

An acceptable proportion of non-loan assets on its books, this is a healthy ticker for your TFSA or RRSP. However, a dividend yield of 1.69% could be a bit higher, and at 8.9% expected annual growth in earnings, the outlook is not significantly high for the next one to three years. With low market fundamentals such as a P/E of 6.8 times earnings and P/B of 0.9 times book, the real draw here is for value investors.

Lundin Mining (TSX:LUN)

With negative -22.5% year-on-year earnings, Lundin Mining had an overall positive five years with an average earnings growth of 20.1%. With a 23.6% expected annual growth in earnings over the next couple of years, investors can expect a rising share price and the chance of capital gains.

Interested parties should get in now while this mining stock is potentially undervalued: look at a P/E of 10.2 times earnings that handily beats the TSX index average, and a P/B ratio of 0.8 times book. Further indication of undervaluation is visible in a share price that’s currently 41% below the future cash flow value.

The bottom line

While all three of the bargain basement stocks listed above would be welcome in a value investors shopping basket, Lundin Mining is without a doubt the best of the bunch, with that cheery outlook over the next couple of years and strong position in a key defensive industry. Transcontinental may be worth a punt if you like those dividends, while Equitable Group may interest those looking to pad out the financials section of their Canadian stock portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

More on Dividend Stocks

Hand Protecting Senior Couple
Dividend Stocks

3 Blue-Chip Stocks So Safe Canadians Can Hold Them Until They Die

Canadian National Railway (TSX:CNR) is a stock worth owning for life.

Read more »

stock research, analyze data
Dividend Stocks

14.7% Dividend Yield? Buy Up This Passive-Income Stock in Bulk!

That dividend yield is high, but it still comes with some strong reasons to consider the stock outside of a…

Read more »

Canadian Dollars bills
Dividend Stocks

1 Dividend Stock That Could Create $5,000 in Tax-Free Passive Income in 10 Years

Here's why Fortis (TSX:FTS) certainly looks like a top dividend stock with outsized total return upside worth buying right now.

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

The Best Canadian ETFs $100 Can Buy on the TSX Today

Dividend ETFs like BMO Canadian Dividend ETF (TSX:ZDV) can add passive income to your portfolio.

Read more »

space ship model takes off
Dividend Stocks

Is WSP Global Stock a Buy for its 0.6% Dividend Yield?

Here's why investors should look beyond WSP Global stock's tiny dividend yield.

Read more »

hand stacking money coins
Dividend Stocks

6 Percent Dividend Yield? I’m Buying This TSX Passive-Income Stock in Bulk!

Are you looking for a TSX passive-income titan? Here's one stock that pays handsomely that you will regret not buying…

Read more »

Dividend Stocks

Top Canadian Stocks to Buy Now and Hold for a Lifetime in a TFSA

If you want stability in your long-term TFSA, then these four are choices you can pick up again and again.

Read more »

RRSP Canadian Registered Retirement Savings Plan concept
Dividend Stocks

Here’s the Average RRSP Balance at Age 54 for Canadians

ETFs like the BMO Canadian Dividend ETF (TSX:ZDV) tend to be good RRSP holdings.

Read more »