Written by Aditya Raghunath at The Motley Fool Canada
The ongoing pullback in the stock market provides investors an opportunity to go bottom fishing and buy quality stocks at a lower multiple. In fact, the time is ripe to create a portfolio of undervalued TSX stocks and benefit from outsized gains when market sentiment improves in the next 12 months. Sure, there is an equal chance for equities to move lower, given the macro environment remains challenging and sluggish. But timing the market bottom is impossible, making every major dip a buying opportunity.
Here are three cheap TSX stocks you can consider buying in November 2023.
Sleep Country Canada stock
Valued at $755 million by market cap, Sleep Country Canada (TSX:ZZZ) operates in the retail mattress and bedding space. Down 49% from all-time highs, the TSX stock currently pays shareholders an annual dividend of $0.95 per share, indicating a yield of 4.4%.
In recent quarters, Sleep Country has experienced softness in consumer demand due to macro headwinds such as higher interest rates and inflation. In the second quarter (Q2) of 2023, its same-store sales fell by 11% year over year while adjusted earnings narrowed by 41% to $0.25 per share.
However, the company acquired the Canadian operations of Casper Sleep, which includes six retail stores and its e-commerce platform, for $27.5 million in cash. It also expanded a partnership with Walmart Canada by opening two new Sleep Country Express stores in Walmart Supercenters.
Priced at 9.6 times forward earnings, Sleep Country stock trades at a discount of 45% to consensus price target estimates.
RB Global stock
Valued at $15.5 billion by market cap, RB Global (TSX:RBA) is an omnichannel marketplace that provides insights and transaction solutions for buyers and sellers of commercial assets and vehicles globally.
The company increased gross transaction volume by 146% year over year to $4.1 billion, including $2.2 billion from its acquisition of IAA. This acquisition allowed RB Global to increase sales by 128% year over year to $1.1 billion while net income grew 63% to $86.8 million.
Priced at 25.5 times forward earnings, RB Global stock trades at a reasonable valuation, given earnings are forecast to rise by 12% annually in the next five years.
Moreover, the company pays shareholders an annual dividend of $0.366 per share, indicating a yield of 1.7%. These payouts have more than tripled in the last 10 years.
The final cheap TSX stock on my list is FirstService (TSX:FSV), a property management company with operations in the U.S. and Canada. Valued at $8.44 billion by market cap, FirstService has returned close to 500% to shareholders since its initial public offering in 2015, easily outpacing the broader markets.
Despite its outsized gains, FirstService trades at 29 times forward earnings, which might seem expensive. But its earnings are on track to expand by close to 18% annually in the next five years.
Its FirstService Residential business is the largest manager of residential communities, while FirstService Brands is among the largest providers of essential property services in North America.
In the first nine months of 2023, FirstService has increased revenue by 19% to $3.26 billion while adjusted earnings before interest, tax, depreciation and amortization grew 25% to $312.4 million.
Before you consider Firstservice Corporation, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in October 2023... and Firstservice Corporation wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 25 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks * Returns as of 10/10/23