2023-11-09 16:10:00 ET
Here are three top TSX stocks that appear to be cheap. Investors shopping for value can investigate the ideas to see if they fit their diversified portfolios . These stocks have the potential to deliver solid total returns over the next three to five years while paying out decent dividend income.
XIU, GSY, MG, and EIF 5-Year Total Return Level data by YCharts
goeasy
Leading non-prime Canadian lender goeasy ( TSX:GSY ) reported solid third-quarter results on Tuesday. Seemingly, a higher interest rate environment has not affected its business. For the quarter, goeasy’s loan originations climbed 13% year over year to $722 million. Its revenue climbed 23% to $322 million. Its loan portfolio rose 33% to $3.43 billion. Importantly, its net charge-off rate dropped 0.50% to 8.8%, which is within the company’s target of 8-10%. (As Investopedia explains, “net charge offs are the debt owed to a company unlikely to be recovered by that company.”) Ultimately, the adjusted earnings per share (EPS) jumped 29% to $3.81.
At about $124 per share at writing, the dividend stock trades at about nine times adjusted earnings, which is a discount of about 25% from its long-term normal valuation. This roughly aligns with the 12-month analyst consensus price target that represents a near-term upside potential of approximately 29%.
At the recent quotation, the stock also offers a dividend yield of 3.1%. goeasy is a Canadian Dividend Aristocrat with what it takes to maintain dividend growth. Its payout ratio is estimated to be about 27% of adjusted earnings this year.
Magna stock
Auto parts maker Magna International ( TSX:MG ) reported solid third-quarter results last week. For the quarter, sales growth was 15% to approximately US$10.7 billion and adjusted EPS rose 33% to US$1.46. The year-to-date picture shows similarly sturdy results — sales growth of 14% to US$32.3 billion and adjusted EPS growth of 26% to US$4.15.
Notably, Magna is experiencing a rebound from lowered results last year. Using 2021 as the base year for comparison instead, its adjusted EPS is expected to rise about 8-12%.
No matter what, Magna is used to periods of extensive growth when the macro environment is positive. It has the potential to deliver double-digit growth rates in its earnings over multiple years. If so, it’s an undervalued stock trading at $71.57 per share or about 9.9 times adjusted earnings. One could argue that its multiple wouldn’t normally be high because it’s a cyclical stock and, therefore, more unpredictable. Analysts believe it trades at a discount of about 21%.
Magna is a Canadian Dividend Aristocrat that maintains a low payout ratio that helps protect its dividend. At the recent quotation, it yields 3.5%.
Exchange Income
Exchange Income ( TSX:EIF ) is categorized under the airline industry and industrial sector. So, investors can imagine it to be a cyclical stock with ups and downs in its profits. On its website, Exchange Income describes itself as “a diversified, acquisition-oriented dividend company focused on opportunities in Aviation Services & Aerospace and Manufacturing.”
Interestingly, unlike most stocks in the airline industry, Exchange Income has a strong track record of dividend payments. Since its inception in 2004, the company has maintained or increased its monthly dividend every year. At writing, it provides a nice dividend yield of almost 5.4%.
The stock is still recovering from its recent dip from market volatility . At $46.73 per share at writing, analysts estimate it trades at a discount of approximately 30%.
The post 3 Remarkably Cheap TSX Stocks to Buy Right Now appeared first on The Motley Fool Canada .
Fool contributor Kay Ng has positions in Exchange Income and Goeasy. The Motley Fool recommends Magna International. The Motley Fool has a disclosure policy .
2023