These 3 TSX Stocks Might Be Getting a Little Too Expensive

These TSX stocks are up double digits this year, but they’re now looking so expensive that I’d probably stay away in the near future at least.

| More on:

The TSX today continues to trade downwards, with only some improvement coming along only recently. That comes in part of a lower-than-expected rate hike by the Bank of Canada by 50 basis points. Yet this might mean some TSX stocks are seeing a rebound that isn’t quite worth the investment quite yet.

In fact, there are some TSX stocks that are downright expensive in this environment. There has been some unwarranted focus on companies that could do well during a recession, and this has pushed prices beyond their worth.

Today, I’m going to look at three overbought TSX stocks you might consider selling.

Canadian Natural Resources

Canadian Natural Resources (TSX:CNQ) has been a strong performer this year, with shares currently up a whopping 62% year to date. It’s been growing thanks to the increase in oil and gas prices, and as the company focuses primarily on Western Canada, this has been a major source of revenue during the surge.

However, with shares up so high, the stock now looks overbought. It currently has a relative strength index (RSI) of 71.53, which is higher than overbought territory of 70. And honestly, shares could drop in the near future with so many countries looking to renewable energy.

That being said, it still is a financially sound company that could bring in serious cash over the next few years, though not forever. It trades at 8.51 times earnings and offers a 3.75% dividend yield. So, if you think there’s an opportunity among TSX stocks during this downturn, then, by all means, keep an eye on CNQ stock.

Bombardier

Bombardier (TSX:BBD.B) has come around a fair bit since its stock merger a few months back. Shares of the company are still down by 9% year to date. But they’ve surged in recent months, climbing a whopping 95% since July!

Yet now, Bombardier stock looks to be in overbought territory with an RSI at 74. The growth comes from new business jets coming on the market coupled with estimate-beating earnings reports quarter after quarter. Even so, it’s unclear how much growth can happen before investors start to question whether they should keep holding the stock, especially as the company’s balance sheet still needs some work.

Even so, if you’re looking for growth, Bombardier stock still seems to be climbing. Plus, earnings are around the corner, and that could bring shares up even higher. Still, should it reach January 2022 levels, we may see a selloff.

Tourmaline Oil

Finally, the biggest winner of 2022 so far has been Tourmaline Oil (TSX:TOU) with shares up 107% year to date alone. Yet this can be a tricky one, as the stock still trades at just 10.6 times earnings, making it look like it could be of some value.

Why the rise? The company was on a hot streak, raising its dividend by 11%, making strong acquisitions and bringing in record cash flow. However, it seems that after this record cash flow, there was a peak point of energy prices. With prices back down to earth, we may start seeing more stabilizing.

Furthermore, long-term Tourmaline stock is just another oil and gas stock that will have to adapt to a renewable energy future. For now, it’s locked solely to oil and gas. And that gives is a poor long-term sentiment — especially at these prices.

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 Amy Legate-Wolfe has positions in BOMBARDIER INC., CL. B, SV. The Motley Fool recommends CDN NATURAL RES. The Motley Fool has a disclosure policy.

More on Investing

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

TFSA Contribution Limit Stays at $7,000 for 2025: What to Buy?

This TFSA strategy can boost yield and reduce risk.

Read more »

calculate and analyze stock
Investing

3 No-Brainer TSX Stocks Under $50

These under-$50 TSX stocks have solid growth potential and can deliver significant returns over time, beating the benchmark index.

Read more »

Make a choice, path to success, sign
Dividend Stocks

Already a TFSA Millionaire? Watch Out for These CRA Traps

TFSA millionaires are mindful of CRA traps to avoid paying unnecessary taxes and penalties.

Read more »

A plant grows from coins.
Stocks for Beginners

1 Canadian Stock Ready to Surge In 2025

First Quantum stock is one Canadian stock investors should seriously consider going into 2025, and hold on for life!

Read more »

doctor uses telehealth
Tech Stocks

What to Know About Canadian Small-Cap Stocks for 2025

Small cap stocks are a great way to experience outsized gains. Here is what you need to know about small…

Read more »

Canada Day fireworks over two Adirondack chairs on the wooden dock in Ontario, Canada
Tech Stocks

Best Tech Stocks for Canadian Investors in the New Year

Three tech stocks are the best options for Canadians investing in the high-growth sector.

Read more »

Happy golf player walks the course
Dividend Stocks

Got $7,000? 5 Blue-Chip Stocks to Buy and Hold Forever

These blue-chip stocks are reliable options for investors seeking steady capital gains and attractive returns through dividends.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Investing

Fortis: Buy, Sell, or Hold in 2025?

Fortis is giving back some of the 2024 gains. Is FTS stock now oversold?

Read more »