Below we look at the top 5 Undervalued Canadian Stocks To Buy Now. For our methodology and a more comprehensive list of cheap Canadian equities, please see 11 Undervalued Canadian Stocks To Buy Now.
5. Nuvei Corporation (NASDAQ:NVEI)
Number of Hedge Fund Shareholders: 18
Analysts’ Consensus Upside: 90.3%
The number of funds long Nuvei Corporation (NASDAQ:NVEI) increased by 20% during the third quarter, with Steven Ng and Andrew Mitchell’s Ophir Asset Management and Ryan Tolkin’s Schonfeld Strategic Advisors being two of the funds to add NVEI to their 13F portfolios during the quarter.
Analysts are also bullish on the Montreal-based fintech company, which provides payment processing services for digital platforms and marketplaces, as their consensus price targets suggest 90% upside for the stock in the next year. Nuvei Corporation (NASDAQ:NVEI), which allows clients to make transactions in 150 currencies and nearly 600 alternative payment methods, has become a major player in the travel space, having formed partnerships with Virgin Atlantic, Air Transat, and Scott Dunn, among others.
Nuvei Corporation (NASDAQ:NVEI) reported a 38% surge in volume growth during Q3 on a constant currency basis, while growing revenue to $197 million for the quarter and adjusted EPS to $0.43, both of which beat estimates. The company expects to generate sales of between $820 million and $850 million for the 2022 fiscal year.
4. Gildan Activewear Inc. (NYSE:GIL)
Number of Hedge Fund Shareholders: 20
Analysts’ Consensus Upside: 27.4%
Gildan Activewear Inc. (NYSE:GIL)’s shares have fluctuated heavily in price over the past few years, but hedge fund ownership of the stock has remained fairly consistent throughout that period. Richard S. Pzena’s Pzena Investment Management continued to hold the largest GIL position, as it has for the past four years. Christopher Shackelton and Adam Gray’s Coliseum Capital also took a large stake in Gildan during Q3, with the fund now having 7.21% 13F exposure to the stock.
Gildan Activewear Inc. (NYSE:GIL), a Montreal-based apparel maker, had another quarter of record sales in Q3, growing revenue by 6% year-over-year to $850 million, with sales volumes and net selling prices both rising during the quarter. That allowed the company to deliver strong gross margins of 29.7% despite the inflationary pressures that have battered many clothing companies. The company declared a cash dividend of $0.169 per share, payable on December 19, which gives GIL shares a solid yield of 2.34%.
National Bank has a CAD45 ($32.78) price target on shares of Gildan Activewear Inc. (NYSE:GIL) along with an ‘Outperform’ rating, while RBC Capital has a $47 price target on them and a similar ‘Outperform’ rating. RBC believes the company will have a strong earnings recovery in Q4 and during 2023.
3. Vermilion Energy Inc. (NYSE:VET)
Number of Hedge Fund Shareholders: 21
Analysts’ Consensus Upside: 48.8%
There’s been a 250% increase in the number of funds long Vermilion Energy Inc. (NYSE:VET) since Q3 2020, and the stock has responded in kind, gaining over 400% during that time. Todd J. Kantor’s Encompass Capital Advisors added a 1.1-million share stake in VET to its 13F portfolio during Q3, while Steve Cohen’s Point72 Asset Management nearly doubled the size of its Vermilion Energy position to 791,450 shares.
Vermilion Energy Inc. (NYSE:VET)’s Q3 sales surged by 79% to CAD965 million ($703 million), with its trailing twelve month sales nearly tripling compared to 2020 sales and its gross profit surging by over 500%. The company did face several headwinds during the latest quarter however, which caused it to suspend its share repurchases in Q4, including a weak Canadian dollar and the implementation of a windfall tax on energy companies in Europe.
Stifel and TD Securities have CAD42 ($30.60) and CAD41 ($29.87) price targets on Vermilion Energy Inc. (NYSE:VET) respectively, along with ‘Buy’ ratings, suggesting close to 100% upside over the next year. BMO Capital has a CAD36 ($26.22) price target and ‘Market Perform’ rating on VET shares.
2. Open Text Corporation (NASDAQ:OTEX)
Number of Hedge Fund Shareholders: 22
Analysts’ Consensus Upside: 74.5%
Open Text Corporation (NASDAQ:OTEX) tied an all-time high in hedge fund ownership during Q3, which it previously reached in both 2015 and 2019. Several of the company’s top shareholders were also expanding their positions during Q3, most notably Israel Englander’s Millennium Management, which hiked its stake by 7,434% to 1.89 million shares.
Shares of Waterloo, Ontario-based enterprise software company Open Text Corporation (NASDAQ:OTEX) have slumped by 41% this year, including by 14% on August 26 after investors reacting harshly to the company’s purchase of British software company Micro Focus at a 99% premium. Several analysts and major OTEX shareholders like the deal however, which will greatly expand Open Text’s operating scale and grow its revenue.
Jarislowsky Fraser Ltd, which owns a 5.6% stake in Open Text Corporation (NASDAQ:OTEX), believes the deal is appealing over the long-term, believing both companies’ results will improve meaningfully via the merger. RBC Capital Markets noted that despite the premium, Open Text acquired Micro Focus at a low EBITDA multiple of just 6.3x. CIBC characterized Micro Focus as a multiyear turnaround story and cut its price target on OTEX shares to $44 from $51, which still implies greater than 50% upside.
1. Bausch Health Companies Inc. (NYSE:BHC)
Number of Hedge Fund Shareholders: 44
Analysts’ Consensus Upside: 179%
Hedge funds and analysts both agree that Bausch Health Companies Inc. (NYSE:BHC) is the best undervalued Canadian stock to buy now. Bausch shares have continued to sink in 2022, falling by 73% to hit a 20-year low. Activist Carl Icahn, whose firm holds two seats on the company’s board, continues to hold the largest BHC position, while healthcare investor John Paulson, who serves as the Chairman of the Board, also owns a large stake in the pharmaceutical company.
Bausch Health Companies Inc. (NYSE:BHC), formerly known as Valeant, is in the midst of a transitional period under new CEO Thomas Appio, as it works to spin off its Bausch + Lomb eye business. The company also plans to spin off its Solta Medical aesthetic device division, but temporarily put those plans on hold earlier this year. Investors haven’t necessarily been thrilled with either of the proposed spin offs.
Bausch Health is also saddled with a mountain of debt which it’s working to restructure and pay down. Beneath all that turmoil is a company with a solid drug portfolio and stable of healthcare products which will generate sales of more than $8 billion this year. A sum-of-the-parts valuation by JPMorgan analyst Chris Schott last year concluded that BHC shares should be worth close to $40. The currently trade hands for just $7.63.
The Miller Value Partners Opportunity Trust Fund discussed some of the challenges that pulled down Bausch Health Companies Inc. (NYSE:BHC) shares during the second quarter in the fund’s Q2 2022 investor letter:
“Bausch Health Companies Inc. (NYSE:BHC) declined during the quarter as the company consummated its Bausch+Lomb IPO at valuations far below expectations, reported disappointing Q1 2022 results, and delayed its plan to spin out its Solta (aesthetics) business due to difficult market conditions. While the company spun off 10% of Bausch+Lomb (BCLO) they retained 90% of the company which they intend to distribute once they have met their target leverage ratio of 6.5-6.7x. The future spin-off value of the Bausch+Lomb piece represents a value of $12.55 per share, 39% above where Bausch Health is currently trading. The company recently appointed John Paulsen as Chair of the Board, which should accelerate value realization.”
For more of the latest stock picks worth considering for your portfolio, check out Best AI Penny Stocks Under $1 and 10 Stocks Under $50 To Buy.
Disclosure: None.
