Written by Aditya Raghunath at The Motley Fool Canada
A volatile equity market provides investors an opportunity to buy quality, beaten-down stocks at a discount. Investors are worried about macro headwinds ranging from interest rates and inflation to geopolitical tensions. But the time is ripe to scoop up shares of TSX companies that are trading at a massive discount to consensus price target estimates.
Here are two absurdly cheap TSX stocks Canadian investors can buy right now.
Valued at $2.8 billion by market cap, EQB (TSX:EQB) stock is down 12.6% from all-time highs. It serves more than six million Canadians through its wholly-owned subsidiaries, such as Equitable Bank and Concentra Bank, which support credit unions across the country.
With $108 billion in assets under management, EQB manages $32 billion in personal loans and $28 billion in business loans. EQB lends commercial loans through a network of mortgage and leasing brokers, lending partners, and other financial institutions. These loans involve lending on multi-unit residential industrial and office buildings as well as other commercial properties.
Despite a tepid lending environment in 2023, EQB increased net income by 88% year over year to $115.5 million in the third quarter (Q3). Its adjusted earnings rose by 70% to $2.98 per share, while customer growth stood at 31% for EQB.
The company ended Q3 with a CET1 (common equity tier-one) ratio of 15.4%, the highest among Canadian banks. This ratio basically compares the equity capital of a bank with total risk-weighted assets. It is used to measure a bank’s ability to tide over an uncertain macro environment, and a higher ratio is favourable.
Bay Street forecasts EQB to increase its adjusted earnings by 19.5% annually in the next five years, showcasing the resiliency of this cyclical bank stock. Priced at less than seven times forward earnings, EQB stock is very cheap and trades at a discount of over 30% to consensus price target estimates.
Valued at $3.8 billion by market cap, Nuvei (TSX:NVEI) stock is down 85% from all-time highs. Nuvei operates in the fintech space and has increased revenue from $245.8 million in 2019 to $843.3 million on the back of several accretive acquisitions.
Nuvei offers technology-powered payment solutions to small and medium enterprises in North America, Europe, the Asia Pacific, the Middle East, Africa, and Latin America. This platform allows customers to process payments regardless of location, device, or preferred payment method.
Unlike several other fintech companies, Nuvei reports a consistent profit that allows it to pay shareholders an annual dividend of $0.40 per share, indicating a yield of 2%.
Priced at 12 times forward earnings, Nuvei stock is very cheap, as analysts expect net income to rise by 18% annually in the next five years.
In the first nine months of 2023, its revenue growth stood at 39% year over year. If we account for acquisitions, Nuvei’s organic growth was much lower at 10%. However, the company continues to reinvest in growth projects and expects capital expenditures to account for 5% of sales.
Analysts remain bullish on NVEI stock and expect shares to rise by 50% in the next 12 months.
Before you consider Equitable Group, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2023... and Equitable Group wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 24 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks * Returns as of 11/14/23
Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nuvei. The Motley Fool recommends EQB. The Motley Fool has a disclosure policy.