MDA:CC - 3 Undervalued Canadian Industrial Stocks to Watch in 2023
2023-05-17 12:15:00 ET
Investing in Canadian industrial stocks could generate double-digit returns in 2023. Investors should keep a close watch or simply buy shares in two of three TSX industrial stocks before a momentum breakout. Lock in a juicy 8.5% dividend with the third one in this article before the housing market recovers.
TerraVest Industries
TerraVest Industries ( TSX:TVK ) is a diversified, little-known $494 million industrial stock that has generated an industry-leading return on equity (ROE), rewarded stock investors handsomely over the past decade and could do so again. TerraVest stock is up 215% over the past half-decade but hasn’t gone anywhere so far this year, yet the company continues to execute for growth.
The company manufactures bulk fuel trailers, LPG delivery trucks and storage tanks, home heating products, and oil and gas processing equipment and provides services to the Canadian and United States energy, mining, agriculture, and transportation industry customers.
Revenue for the first three months of 2023 was 28% higher year over year, and net income surged by 25%. Acquisitions played a role, but organic sales growth was 20%. The company has grown revenue and earnings at double-digit clips over the past five years. Its ROE of 20.3% towers over its industry average of 16.1%.
TerraVest generates massive free cash flow. It paid out only 10% of distributable cash flow in dividends over the past two quarters. Its dividend yields 1.8% annually. The company announced a share-repurchase program in May targeting to buy back up to 10% of its public float because management believes shares are undervalued. A low price-to-earnings (P/E) multiple of 10.7 on the fast-growing profitable company’s stock seems to confirm so.
Watch or buy MDA stock right now
Space technology and exploration partner MDA ( TSX:MDA ) is a $910 million Canadian industrial stock that could generate massive returns for investors this decade.
The company develops and manufactures satellite systems sensing and communications technology, and it’s at the forefront of a bourgeoning space economy. MDA stock trades 33% below its highs set in 2022.
In a recent earnings report, revenue for the first quarter of 2023 grew by a staggering 57% year over year. Growth was mainly from a surge in satellite systems and the robotics and space operations segments. The company guides for double-digit revenue growth for the remainder of 2023.
In a 2020 report, investment bank Morgan Stanley projected that declining launch costs, advances in technology, and rising public sector interest could propel the global space economy to breach the US$1 trillion mark by 2040. In more recent studies, Euroconsult estimates the value of the global space economy to have grown from US$370 billion in 2021 to US$464 billion in 2022, while on its way to tipping US$737 billion within a decade.
Given its 50-year industry experience, MDA is well placed to grab a growing share of the expanding market, and insiders have bought the dip in MDA stock during the past six months. They believe their employer will do well and are backing their belief with personal capital.
Insiders acquired 136,750 shares in MDA stock over the past six months, including recent purchases by Director Louis Vachon and Chief Financial Officer Vito Culmone during the past three months. Louis Vachon invested more than $210,000 in his employer’s stock this month. The insider’s trades followed the company’s impressive first-quarter 2023 earnings release on May 12.
Could many more insiders acquire shares? Growing insider purchases could imply increased confidence in MDA’s ability to win more space technology contracts in 2023.
MDA stock is in recovery given a quick 15% five-day gain.
Doman Building Materials
Doman Building Materials ( TSX:DBM ) is a Canadian industrial stock trading 25% below its highs printed during the past year. The company is a wholesale distributor of building materials and home renovation products. Market jitters over a weaker housing market in North America dragged its valuation lower, but Canadian housing could be recovering.
The TSX dividend stock touts a juicy 8.5% annual dividend yield. Investors looking to add more passive-income sources to their retirement portfolios may scoop Doman Building Materials stock before its valuation recovers with the housing market.
Canadian national home sales went up 11.3% in April. Investor sentiment could turn positive, and the business could remain strong given the ever-growing housing demand in Canada, supported by massive immigration rates.
The post 3 Undervalued Canadian Industrial Stocks to Watch in 2023 appeared first on The Motley Fool Canada .
Fool contributor Brian Paradza has no positions in any of the stocks mentioned. The Motley Fool recommends TerraVest Industries. The Motley Fool has a disclosure policy .
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