Spring Sale
Buying shares solely based on their low dollar value is not a wise strategy, as the price of a stock alone does not indicate its growth potential. Further, there could be a valid reason for a stock’s low value. Nonetheless, this doesn’t imply that all low-priced stocks are unworthy of investment. Numerous fundamentally strong Canadian stocks with significant growth prospects are trading below $20.
With this backdrop, let’s look at two stocks to buy with $20 now and hold forever.
Lightspeed
Trading under $20, shares of Lightspeed Commerce (TSX:LSPD) appear attractive due to its discounted valuation and high growth prospects. Notably, Lightspeed stock is down about 36% from its 52-week high due to management’s cautious near-term outlook. While this technology stock has lost significant value, its fundamentals remain strong, with the company growing its sales at a solid pace and reducing its cash burn.
Notably, its top-line growth rate has shown sequential improvement in the past two consecutive quarters, reflecting the success of its unified payments initiatives. Moreover, the expected increase in customers switching to its unified suite of tools will likely drive its sales in the coming years.
Lightspeed’s gross transaction volume (GTV) is growing, with gross payment volumes (GPV) accounting for only about one-third of its GTV. This implies the company has a significant runway for growth in the coming years. Additionally, Lightspeed’s shift towards high GTV customers will substantially lower churn and drive its average revenue per user (ARPU) as these customers have a higher lifetime and can adopt its multiple modules.
In addition to organic growth, Lightspeed stands to gain from strategic acquisitions. These acquisitions are anticipated to drive its customer locations, foster new product innovations, and fortify its competitive positioning. In summary, its compelling valuation, tailwinds from the ongoing digital transformation, and focus on generating sustainable earnings in the long term support my optimistic outlook.
WELL Health
Speaking of high-quality stocks to buy with $20, one could consider investing in the shares of WELL Health Technologies (TSX:WELL). This digital healthcare company continues to deliver record revenues led by stellar growth in patient visits. What stands out is that WELL Health has already achieved profitability and consistently delivered positive adjusted EPS. Furthermore, WELL Health stock is trading extremely cheap, which provides an excellent buying opportunity near the current levels.
The company recently released its preliminary fourth quarter (Q4) financials. Its leadership expects to announce its 20th consecutive quarter of record quarterly revenue in Q4 of 2023, driven by solid care metrics, including higher patient visits. Management highlighted that WELL Health continues to generate solid organic growth. Moreover, it also benefits from its accretive acquisitions.
While the company’s top line is growing at a healthy pace, WELL Health is streamlining its business operations and implementing a cost optimization program to enhance operational efficiency and generate profitable growth. Further, its newly deployed suite of artificial intelligence (AI)-powered products will likely accelerate its growth rate and support its share price.
WELL stock is trading at a next-12-month Enterprise Value/Sales multiple of 1.6, much lower than its historical average of 5. This makes it too cheap to ignore near the current levels.
