We recently compiled a list of the 7 best Canadian stocks under $20, and in this article we'll take a look at how Bausch Health Companies Inc. (NYSE:BHC) stands in relation to other Canadian stocks under $20.
What's happening in the Canadian stock market?
The Canadian economy is beginning to stabilize thanks to a steady downward trend in inflation and the Bank of Canada's accommodative policy stance, paving the way for stronger economic growth in the future. Reuters reported on July 19 that the Bank of Canada cut its overnight interest rate by 25 basis points to 4.5% based on its outlook for continued declining inflation.
Canada's inflation rate fell a little more than expected, raising the possibility of an interest rate cut. On July 16, Reuters reported that the Consumer Price Index (CPI) for June 2024 fell 0.1% from the previous month to 2.7%, paving the way for an interest rate cut.
The interest rate cut has resulted in a strong performance for the Canadian stock market. On August 16, Reuters reported that the Canadian stock index rose on Friday, posting its biggest weekly gain this year. Investors around the world have welcomed recent signs of a recovery in the U.S. economy, and the recent record rise in gold prices has also boosted the mining sector.
The S&P/TSK composite index rose 0.1% to finish at 23,054.61, marking its seventh consecutive day of gains and its longest winning streak since April 2023.
Sector-wise, the materials group, which consists of metal minerals and fertilizer companies, rose 1.5% as gold prices rose 2% to an all-time high. Additionally, financial markets, which contributed 29% to TSK's weighting, rose 0.6%. However, the energy sector fell 1.1% due to lower oil prices, closing 1.9% lower than expected at $76.65. The drop in oil prices was mainly due to a slowdown in demand from China.
On August 13, Ross Healy, Chairman of Strategic Analysis Corporation and Portfolio Manager at McNicol & Associates Asset Management, appeared on Bloomberg to discuss TSK and the performance of the U.S. stock market. Ross Healy noted that the Canadian stock market is trading at 1.5 times adjusted book value, while the Nasdaq is trading at 9.5 times book value. Citing these figures, Ross Healy stated that for investors looking to invest for more than five years, the Canadian stock market is more attractive due to its growth potential and the stock portfolio it can offer.
Ross Healy further stated that he believes that while the US has long held the advantage, the market is now moving towards Canadian dominance. Furthermore, with precious metals and gold options on the TSK Index, the market is poised for long-term growth. While he is bullish on gold-related companies, Ross Healy noted that those with ample capital on their balance sheets and who have been able to identify and take on greenfield projects have been more successful compared to their competitors.
The story continues
Our Methodology
To create a list of the 7 best Canadian stocks under $20, we used the Finviz screener. Using the screener, we filtered for Canadian stocks trading under $20 and sorted them by market cap to create a consolidated list of stocks. We then ranked these stocks based on the percentage increase in the average price target by Wall Street analysts. As of August 18, the stocks are ranked in ascending order of the percentage increase in the average price target. Additionally, we have included the stock price for each stock as of August 18, 2024.
At Insider Monkey, we stick to stocks that hedge funds concentrate their investments in. The reason is simple: our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter, and has returned 275% since May 2014, beating the benchmark by 150 percentage points (more details here).
An array of pharmaceutical and medical products in a warehouse, showing the range of products available.
Bausch Health Companies (NYSE:BHC)
Average target price increase as of August 18: 39.62%
Stock price as of August 18: $5.73
Bausch Health Companies Inc. (NYSE:BHC) is an international healthcare company that develops and markets pharmaceuticals and medical devices in the United States, Canada and internationally. The company operates through the following segments: Salix, International, Solta Medical, Diversified and Bausch + Lomb.
To understand the company's products, we need to consider what each of Bausch Health Companies Inc. (NYSE:BHC)'s divisions do. The Salex division focuses on gastroenterology products in the United States, while the International division sells a variety of medical devices and pharmaceuticals to the global market. Additionally, the Solta Medical and Bausch + Lomb divisions specialize in medical devices and eye care products, respectively. Finally, the Diversified division offers a variety of pharmaceuticals, including generic drugs and dental products. Overall, Bausch Health Companies Inc. (NYSE:BHC) is an integrated healthcare company with operations and customers around the world.
Bausch Health Companies Inc. (NYSE:BHC) had a strong second quarter 2024 performance. Net revenues increased 6% year over year to $1.19 billion (excluding Bausch + Lomb), growing on an organic basis. Revenue growth was driven by overall organic growth, led by Xifaxan (a drug in the Salix segment), which grew 10% year over year. Xifaxan enabled the Salix segment to generate over $557 million in revenue, making it the largest revenue contributor.
Regionally, Asia Pacific was one of the strongest markets, growing 19% during the quarter. Within Asia Pacific, business in South Korea nearly doubled compared to last year, while China and Taiwan also recorded organic growth in the high teens.
The company has a strong international base and has been experiencing impressive revenue growth. Even more remarkable is its ability to grow revenue for the fifth consecutive year. The company's adjusted EBITDA grew 8% year over year to $614 million. Bausch Health Companies Inc. (NYSE:BHC) was able to generate strong operating cash flow of $380 million during the quarter, primarily due to improved operating performance and favorable working capital movements.
Bausch Health Companies Inc. (NYSE:BHC) is an investment worth considering. Not only did it have a strong last quarter, but the company has also grown revenue by 2% and free cash flow by 14% over the past decade. BHC is cheap even at current levels, trading at just 2x forward earnings, a 93% discount to its peers. Furthermore, the company's earnings are expected to grow 2% for the year to $1.04. Eight analysts have agreed on a “Buy” opinion on the stock, with a median target price of $8, suggesting an upside of 39.62% from current levels.
Overall, BHC ranks fifth on our list of best Canadian stocks under $20. While we acknowledge the potential of BHC as an investment, we believe AI stocks have a better chance of delivering higher returns in the short term. If you're looking for AI stocks that are more promising than BHC but still trade for less than five times their earnings, check out our report on the cheapest AI stocks.
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Disclosures: None. This article was originally published on Insider Monkey.
