4 Cheap Stocks Poised to Beat Market Averages

These high-quality stocks are trading cheap and are poised to outperform the market.

The stock market continues to remain highly volatile. Newer variants of the coronavirus, inflation concerns, difficult comparisons, and high valuations make it tough to invest in equities. While the volatility in the market could remain elevated in the near term, several high-quality stocks are trading cheap, providing an excellent buying opportunity. 

In this article, I’ll discuss four TSX stocks that are trading cheap but have strong growth potential. 

StorageVault Canada  

StorageVault Canada (TSXV:SVI) offers storage locations and logistics services. The company is rapidly expanding its rentable space and is growing fast. Thanks to its strong financial performance and solid fundamentals, StorageVault stock has increased over 81% over the past years and outperformed the market averages by a wide margin. 

Despite the surge in its price, StorageVault stock is trading cheap (under $10). Moreover, I expect the ongoing momentum in its core business, strategic acquisitions, growing rentable space, and strong competitive positioning to drive its top line and, in turn, its stock price. Further, higher occupancy, cost optimization, and operational efficiency augur well for growth. 

Lightspeed 

The significant correction in Lightspeed Commerce (TSX:LSPD)(NYSE:LSPD) stock has made it cheap on the valuation front. It’s worth noting that Lightspeed stock is trading at an NTM EV/Sales multiple of 7.2, which is significantly lower than its historical average of 23.6.

Besides trading cheap, Lightspeed offers high growth. The shift in selling models towards omnichannel platforms, increased payments penetration, expansion into high-growth markets and verticals, and large addressable market positions it well to deliver stellar financials in the coming years. Moreover, acquisitions, higher average revenue per user, and product innovation will likely accelerate its growth and push its stock price higher. 

Algonquin Power & Utilities

Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) operates a low-risk business. However, it has consistently outperformed the benchmark index over the past several years and offers reliable dividend income. 

Algonquin Power’s growing rate base will expand its high-quality earnings base, which, in turn, will drive its earnings and stock price. Meanwhile, its long-term contracts, renewable power capacity expansion, and strategic acquisitions will support its growth. 

It has projected a 7-9% annual growth in its earnings over the next five years, which is encouraging. Moreover, its stock has witnessed a healthy pullback, making it cheap on the valuation front. Overall, it has a high-quality utility base, profitable growth, low valuation, and a high dividend yield of 4.9%. 

Absolute Software

Absolute Software (TSX:ABST)(NASDAQ:ABST) stock is another top-quality stock trading cheap. Notably, its NTM EV/sales multiple of 3.1 compares favourably to the peer group average of 5.5. Moreover, it is well below its historical average. 

Besides trading cheap on valuation, Absolute Software has multiple growth vectors that support my view. I expect the higher enterprise spending on digital transformation and cybersecurity will drive demand for its products and offerings. 

Moreover, its large addressable market, product innovation, and growing geographical footprint augur well for growth. Also, accretive acquisitions, higher customer retention rate, and cross-selling are expected to accelerate its growth rate and drive its stock price higher. 

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Absolute Software Corporation and Lightspeed Commerce.

More on Investing

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

engineer at wind farm
Energy Stocks

Invest $20,000 in This Dividend Stock for $100 in Monthly Passive Income

This dividend stock has it all – a strong outlook, monthly income, and even more to consider buying today.

Read more »

Hourglass and stock price chart
Stock Market

It’s Not Too Late: Invest in These TSX Growth Stocks Now

Solid fundamentals of these top TSX growth stocks could help them maintain strong upward momentum in the years to come.

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

stocks climbing green bull market
Stocks for Beginners

3 TSX Stocks Soaring Higher With No Signs of Slowing

Don't ignore stocks just because they look like they're at a high price. Instead, see exactly why they've driven so…

Read more »

dividends can compound over time
Bank Stocks

Is TD Bank Stock a Buy for Its 5.2% Dividend Yield?

TD Bank stock offers a rare 5.2% dividend yield—can it rebound from challenges and reward contrarian investors? Here's what to…

Read more »

chart reflected in eyeglass lenses
Investing

How Should a Beginner Invest in Stocks? Start With This Index Fund

This Vanguard index fund is the perfect way to start a Canadian investment portfolio.

Read more »

analyze data
Bank Stocks

Is BMO Stock a Buy for its 4.7% Dividend Yield?

Bank of Montreal is up 20% since late August. Are more gains on the way?

Read more »