Despite the steep fall on Tuesday amid higher-than-expected inflation numbers in the United States, the Canadian equity markets have bounced back strongly to close the last week in the green. The S&P/TSX Composite Index rose 1.2% last week amid favourable commodity prices and solid quarterly performances. However, despite improving broader investor sentiments, few companies continue to trade at attractive valuations, thus making them attractive buys.
Given their multi-year growth potential and cheaper valuation, the following three TSX stocks are excellent buys right now.
TC Energy
TC Energy (TSX:TRP) is a midstream energy company that reported solid fourth-quarter performance last week. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and adjusted EPS (earnings per share) grew by 15.8% and 21.6%, respectively. The energy infrastructure company put around $5.3 billion worth of projects into service last year, strengthening its asset base and driving its financials.
Besides, the company has planned to invest around $8 to $8.5 billion this year and $6 to $7 billion annually for the next two years. These investments could expand its asset base, thus driving its financials. Boosted by these investments, management projects its adjusted EBITDA to grow at a CAGR (compound annual growth rate) of 6%, excluding its liquids pipeline segment. The Calgary-based midstream company is working on its planned spin-off of the liquids pipeline segment and expects to complete it in the second half of this year.
Meanwhile, TC Energy has been raising its dividends since 2000, thanks to its low-risk midstream business, with around 97% of its adjusted EBITDA generated from long-term contracts and regulated assets. It currently offers a healthy dividend yield of 7.20% and trades at an attractive NTM (next 12 months) price-to-earnings multiple of 12.7, making it an attractive buy.
Alimentation Couche-Tard
Second on my list would be Alimentation Couche-Tard (TSX:ATD), a convenience store operator with a presence across 28 countries. It currently operates 16,700 stores, with 13,100 offering road transportation fuel. Given the essential nature of its business and continued expansion, the company is trading at an over 5% high year to date. Last year, it delivered impressive returns of 32%. Despite healthy returns in the previous 14 months, ATD trades at an attractive NTM price-to-sales multiple of 0.8.
Besides, ATD is progressing with its “10 For The Win,” a five-year strategy to grow its adjusted EBITDA from $5.8 billion in 2023 to $10 billion by 2028. It recently acquired 2,175 sites from TotalEnergies across Germany, Belgium, the Netherlands, and Luxembourg, thus strengthening its European presence. Meanwhile, the energy major is developing new stores, continuing with acquisitions, and focusing on developing new products, which could boost its financials in the coming quarters. Also, the company has raised its dividend at a CAGR of 27% for the last 10 years. Considering all these factors, I am bullish on ATD.
goeasy
goeasy (TSX:GSY) offers lending and leasing services to subprime lenders. The Mississauga-based company has been growing its revenue and EPS in double digits for the last 20 years. Supported by these impressive financials, the company has returned around 2,700% in the previous 20 years at a CAGR of 18.3%. Despite these solid returns, the company’s valuation still looks attractive, with its NTM price-to-sales and NTM price-to-earnings multiples at 2 and 10.5%, respectively.
Meanwhile, the company wants to expand its portfolio and lower its risk in this inflationary environment. So, it continues to launch new products, add new delivery channels, and strengthen its auto financing segment to boost its sales. Besides, the company is adopting next-generation credit models and enhanced underwriting and income verification processes, which could reduce its risk. Its net charge-off rate currently stands at 8.8%, at the lower end of its 8.5% to 10.5% guidance. GSY has also raised its dividend for 10 consecutive years, with its dividend yield currently at 2.64%. So, I believe goeasy would be an excellent buy.
