SHOP:CC - 2 Top TSX Value Stocks for Outsized Returns
As the list of macro and geopolitical challenges has increased in 2022, there’s no shortage of stocks offering value. For instance, tech is one sector that has witnessed a significant correction in the recent past, and several stocks are trading cheap. Thus, now is an opportune time to buy top-quality growth stocks offering excellent value. These are my top two picks.
Shopify
Within the tech space, Shopify (TSX:SHOP) (NYSE:SHOP) stock is an attractive investment at current levels. While Shopify stock has recovered from its lows, it is still down over 53% on a year-to-date basis. The significant correction in its price has led to a compression in its valuation. Meanwhile, it continues to expand rapidly, which supports my outlook.
A slowdown in growth, pressure on margins from higher investments, and macro headwinds have led investors to dump Shopify stock. While Shopify’s growth could take a hit in the first half due to tough comparisons, it could accelerate in the latter part of this year and support the recovery in its stock price. Further, its higher investments in commerce infrastructure are likely to provide a solid base for long-term growth.
I believe the structural shift towards omnichannel platforms, growing merchant base, market share gains in the U.S. retail, and expansion of its products into newer geographies bode well for growth. Meanwhile, growing adoption of its payments solutions and other high-value offerings, strengthening of the fulfillment network, and an uptick in social commerce provide a solid foundation for long-term growth.
Overall, Shopify has multiple growth vectors. Moreover, it is trading at EV/sales multiple of 12.3, which is at a multi-year low and provides an excellent entry point.
WELL Health
The digital healthcare company WELL Health Technologies (TSX:WELL) is the second stock on my list. It’s worth noting that the pandemic led to a surge in demand for WELL Health’s products and services and drove its stock price higher. However, economic reopening and general selling in high-growth stocks wiped out a considerable portion from WELL stock.
While WELL Health stock corrected quite a lot, it consistently delivered stellar financial performance, even amid the easing of lockdown measures. This signifies the strength of its business and indicates that WELL Health could deliver outsized returns in the long term.
Notably, WELL Health recently announced that its omnichannel patient visits increased 123% in Q4 and came in at 700,359. Further, its quarterly revenue surged 573% year over year. Notably, the company again reported positive adjusted EBITDA and expects to deliver profitable growth in 2022, which is encouraging.
Overall, the solid momentum in its business, reflected through the continued strength in organic revenue and opportunistic acquisitions, will likely accelerate WELL Health’s growth. Furthermore, the extensive network of its outpatient medical clinics, strong performance of its U.S. business, and higher patient visits augur well for growth.
Given the pullback in WELL Health stock, its EV/sales multiple stands at 2.9, which is cheap and at a multi-year low.
The post 2 Top TSX Value Stocks for Outsized Returns appeared first on The Motley Fool Canada .
Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool owns and recommends Shopify.
2022