We recently compiled a list of the 7 Most Undervalued Canadian Stocks To Buy According To Analysts. In this article, we are going to take a look at where Equinox Gold Corp. (NYSE:EQX) stands against the other undervalued Canadian stocks.
The Canadian stock market experienced a notable rebound in the third quarter of 2024, following a sluggish performance earlier in the year. This resurgence was primarily fueled by a series of interest rate cuts by the Bank of Canada, which helped cool inflation and support broader economic recovery. The central bank’s actions, which included rate reductions totaling 75 basis points so far, have rejuvenated the real estate market and provided a significant lift to financial services stocks. According to a report by Reuters, the Toronto market gained 9.7% in Q3 2024, making it the strongest quarterly performance since 2019. The impact of these measures has created an optimistic outlook for the market, potentially setting the stage for continued growth in the coming months.
The third quarter proved to be the strongest for Canada’s main stock market, thanks to a combination of domestic rate cuts and rebounding global markets. Economies around the world showed signs of recovery, improving investor sentiment and benefiting Canadian equities. Financial and technology stocks were among the biggest contributors to the market’s positive performance, with financial stocks gaining 10% and tech stocks up by 12% during the quarter, according to data from Reuters.
This strong performance was driven by key players in the industry, highlighting the potential of Canadian financial and tech stocks. The financial sector also saw significant gains, supported by the large weight of financials in the Canadian index, which amplified the impact of rate relief on credit performance. The recovery was further bolstered by strong earnings reports and a pivot towards rate cuts by the U.S. Federal Reserve, which lent additional support to the Canadian market.
The impressive performance of Canadian stocks can be attributed to a combination of domestic and global factors. Analysts noted that the Bank of Canada’s rate cuts had a revitalizing effect on the real estate market, which in turn bolstered financial services stocks. Jimmy Jean, a prominent economist, pointed out that the expectation of additional rate cuts created a favorable environment for the real estate sector, allowing it to lead the market recovery.
Furthermore, the Canadian stock market benefited from a broader global recovery, as investor sentiment improved in tandem with solid earnings reports from international markets. In this context, Canada emerged as one of the best-performing markets worldwide in the third quarter, following a period of underperformance in the second quarter.
As the outlook for the remainder of the year unfolds, analysts anticipate that if the Bank of Canada continues its rate-cutting strategy, the positive momentum could persist. Lower mortgage rates are expected to alleviate borrowing costs for households, stimulating demand for housing and further strengthening the real estate and financial sectors. However, challenges remain, particularly in light of geopolitical tensions that could impact oil prices and the energy sector. Despite these concerns, the overall sentiment surrounding Canadian equities remains cautiously optimistic, with a focus on identifying undervalued stocks poised for growth in this evolving market landscape.
With these factors in mind, this article delves into the seven most undervalued Canadian stocks that analysts recommend for investors seeking opportunities in this recovering market.
Our Methodology
For this article, we used the Finviz stock screener to identify all the companies operating out of Canada with a forward Price-to-Earnings (P/E) ratio of less than 15 as of October 7, 2024. We then reviewed the price targets set by analysts for each stock and compared them to their respective closing prices on October 7 to evaluate the upside potential. Additionally, we analyzed data from approximately 912 elite hedge funds tracked by Insider Monkey during the second quarter of 2024 to assess hedge fund ownership of each company. The stocks are ranked in ascending order based on their upside potential.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of a large-scale gold mine, showing the extent of the company’s operations.
Equinox Gold Corp. (NYSE:EQX)
Upside Potential: 28%
Forward Price to Earnings (P/E) Ratio: 5.86
Number of Hedge Fund Holders: 17
Equinox Gold Corp. (NYSE:EQX) is a Canadian mining company focused on exploring, acquiring, developing, and operating gold and silver properties in the Americas. With a diversified portfolio spanning California in the U.S., Guerrero State in Mexico, several states in Brazil, and Ontario, Canada, the company has established a strong presence in the mining industry. Equinox Gold Corp. (NYSE:EQX) stock is worth considering for inclusion in the list of undervalued Canadian stocks due to its expansive asset base, strategic operational initiatives, and sound financial performance.
In Q2 2024, Equinox Gold Corp. (NYSE:EQX) demonstrated steady production with a focus on enhancing efficiency and cost management across its properties. The company produced over 122,000 ounces of gold in the second quarter and sold approximately 115,000 ounces, generating revenue of $269 million. This performance was driven by the initial production at its flagship Greenstone mine in Ontario, where the company recently acquired full ownership, consolidating its interest from 60% to 100%. This acquisition is expected to bolster Equinox Gold Corp. (NYSE:EQX) future cash flow and EBITDA, positioning the Greenstone mine as one of the largest and highest-grade open-pit gold mines in Canada.
Operationally, the company managed an average cash cost per ounce sold of $1,747 and an all-in sustaining cost (AISC) of $2,041 for Q2. Although these costs were higher than the same period last year due to temporary operational disruptions at the Fazenda mine in Brazil and geotechnical issues at the Piaba pit in Arizona, Equinox has undertaken mitigation measures and resumed production in affected areas. With operations now stabilizing and Greenstone’s production ramping up, the company is on track to reduce costs and achieve its revised guidance of producing between 655,000 and 750,000 ounces of gold for 2024.
From a financial standpoint, Equinox Gold Corp. (NYSE:EQX) reported $45 million in operating cash flow, highlighting its ability to generate solid cash flows despite increased costs. The company’s adjusted EBITDA for the quarter stood at $51 million, which remained consistent with Q1 2024. Equinox also undertook strategic financing activities, including a $500 million term loan and a $299 million equity financing, to support the Greenstone acquisition and strengthen its balance sheet.
With its robust production outlook, improved cost management, and strategic acquisitions, Equinox Gold Corp. (NYSE:EQX) is well-positioned for long-term growth, making it an attractive undervalued Canadian stock for investors seeking exposure to the mining sector.
Overall EQX ranks 5th on our list of the most undervalued Canadian stocks to buy according to analysts. While we acknowledge the potential of EQX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EQX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
