Don't Miss AI's Third Wave
The stock market feels the heat as macroeconomic uncertainty and worries over U.S.-Canada trade tariffs weigh on investor sentiment. With volatility on the rise, the recent selloff has pushed several high-quality Canadian stocks into undervalued territory, creating a potential buying opportunity for those with a long-term outlook.
Despite the market pressure, certain companies with strong fundamentals remain well-positioned for future growth. These stocks, now trading at attractive levels, offer investors a chance to buy and hold for significant upside potential.
Against this background, here are my top three undervalued stocks to buy right now.
Undervalued stock #1
Shares of the Canadian subprime lender goeasy (TSX:GSY) look highly attractive near the current price levels. The financial services company is growing rapidly, delivering double-digit top and bottom-line growth over the past several years. Additionally, goeasy has a track record of consistently increasing its dividends over the last 11 years, making it a compelling income stock. Despite these strong fundamentals, the stock is undervalued, representing a buying opportunity.
Over the past five years, goeasy’s top line increased at a compound annual growth rate (CAGR) of over 20%. Meanwhile, its earnings per share (EPS) sports a CAGR of 28% during the same period. Thanks to its impressive financials, goeasy stock has gained over 240%, growing at a CAGR of 27.7% during this period.
Recently, goeasy stock has experienced a modest pullback, down approximately 10.7% year to date. This decline has positioned the stock with an attractive next-12-month (NTM) price-to-earnings (P/E) ratio of 7.5, well below its historical average. This valuation appears particularly compelling given goeasy’s double-digit earnings growth rate, a solid dividend yield of 3.9%, and a return on equity (ROE) exceeding 26%.
While goeasy stock is undervalued, the company is poised to deliver solid growth. The financial services company will benefit from its leadership in Canada’s non-prime lending sector. Moreover, its expanding consumer loan portfolio and solid credit underwriting capabilities augur well for future earnings and dividend growth. Overall, goeasy will likely deliver solid financial performance, driving its stock price higher.
Undervalued stock #2
For investors hunting for undervalued stocks, Lightspeed (TSX:LSPD) might be too cheap to ignore. This cloud-based commerce platform has seen its stock take a hit due to ongoing macroeconomic uncertainties. Adding to the pressure, the company recently announced the conclusion of its strategic review, deciding to remain publicly traded rather than go private. This decision didn’t sit well with the market, triggering a significant drop in share price.
However, this decline presents a potential buying opportunity. This tech stock is now trading at historically low valuation levels, with an NTM enterprise value-to-sales (NTM EV/sales) ratio of just 0.8 and a price-to-sales (P/S) ratio of 1.4—both marking multi-year lows.
While the stock is trading cheap, Lightspeed remains well-positioned for long-term growth. The shift toward digital and multi-channel commerce provides a solid foundation for future growth. Moreover, its strategic acquisitions will accelerate its growth and customer base. Also, with a growing base of high-value customers and a focus on increasing average revenue per user (ARPU), the company is moving toward sustainable profitability, which will support its share price.
Undervalued stock #3
WELL Health (TSX:WELL) stock has given up a significant portion of its gains and is down about 24.2% year to date. This significant pullback has driven the stock’s valuation lower. The stock trades at an NTM EV/sales multiple of 1.5, well below its historical average, representing a buying opportunity.
While the digital healthcare company is trading cheaply, its fundamentals remain solid, and it is growing rapidly. Moreover, the company’s focus on strategic acquisitions further accelerates its growth.
As a digital healthcare company, WELL Health operates in a defensive sector, offering resilience against economic downturns. Additionally, U.S. tariffs on Canada have no impact on its financials, as it does not rely on cross-border sales.
With a growing omnichannel healthcare network and a focus on scaling operations through acquisitions, WELL Health is poised for significant growth. Efforts to enhance profitability and strengthen its balance sheet add to its long-term investment appeal, making it a compelling buy at current levels.
