Write by Sneha Nahata at The Motley Fool Canada
Canadian tech stocks recovered a bit in 2023, with shares of several companies outperforming the broader market index by a wide margin. Despite the recent up-move in technology stocks, they continue to trade cheap on the valuation front, making them attractive investments near the current levels.
With this background, let’s look at two Canadian stocks from the technology space trading at a significant discount.
WELLHealth (TSX: WELL) provides digital healthcare services, which is why investors sold its stock in 2022, anticipating a slowdown in demand amid easing COVID-related restrictions. However, that didn’t play out, and the company consistently delivered stellar organic revenue and turned profitable, leading to a sharp recovery in its price share. Further, its operations remain immune to the macro headwinds.
Thanks to its solid financial performance, WELL Health stock more than doubled on a year-to-date basis. Despite the recent rally, WELL Health trades at a significant discount. It trades at a next-12-month (NTM) enterprise value (EV)-to-sales multiple of 2.6 — much lower than the pre-COVID levels of 6.5 — making it a solid growth stock near the current levels.
The company’s management remains upbeat and expects the momentum in its business to sustain in 2023 across all business segments. It projects its top line to increase by 17-20% in 2023, reflecting higher in-person and virtual patient visits. Impressively, its high-margin virtual services business continues to expand, indicating strong profitability ahead. Moreover, the company’s focus on acquisitions will likely accelerate its growth rate and expand its market share.
Shares of the commerce-enabling platform provider Lightspeed (TSX:LSPD) are too cheap to ignore. After losing substantial value in 2022, Lightspeed stock is down about 12% year to date. Given the correction, Lightspeed stock looks incredibly cheap near the current price levels.
It is trading at a NTM EV-to-sales multiple of 1.3, which is near to all-time low. While its stock is trading at a massive discount, the company is steadily growing its business, focusing on driving efficiency and moving toward profitability, which could act as a strong catalyst.
Lightspeed is expected to benefit from the ongoing shift towards omnichannel platforms. As an increased number of retailers and restaurant operators start spending on modernizing their legacy payments platform and expanding to new locations, the demand for the company’s digital products will likely grow.
Focusing on enhancing the go-to-market approach, the company sells only two core products targeting retailers and restaurateurs. Through this approach, Lightspeed is streamlining its operations and moving towards achieving profitability.
Lightspeed also targets customers with high GTV (gross transaction value). Customers with higher GTV can use Lightspeed’s multiple modules, thereby driving the average revenue per user and leading to a lower churn rate.
Besides organic growth, Lightspeed’s focus on accretive acquisitions bolsters its customer locations, grows its market share, and helps expand its products. Overall, Lightspeed stock is trading extremely cheap, while it has multiple growth catalysts to drive its shares higher in the long term.
The post These Canadian Technology Stocks Are Trading at a Discount appeared first on The Motley Fool Canada.
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