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TSX stocks have fallen 10% this year amid record inflation and aggressive interest rate hikes. However, some names are down much more than that and offer value for long-term investors.
After doubling this year, Vermilion Energy (TSX:VET) The stock was weak due to proposed windfall taxes in Europe. Due to uncertainties over the impact, management halted its share buyback plan since its recent quarterly results. As expected, investors have expressed their displeasure in recent weeks, taking the stock 33% below its August highs.
Vermilion stands out among TSX energy stocks with its large exposure to European assets. Nearly 30% of its total production comes from Europe, which has been a key growth driver for its earnings this year.
Management currently expects an impact of approximately $700 million in one-time taxes on its bottom line for 2023 and 2024. Given higher gas prices in Europe and prospects for massive earnings growth, Vermilion continues to offer attractive shareholder value. It is currently trading at a free cash flow yield of 35%, well above the average of its peers.
Despite the windfall taxes, Vermilion intends to keep debt repayment on track. Thus, it will likely continue to improve its balance sheet and profitability.
Although energy stocks have rebounded tremendously so far, the recovery looks far from over. Vermilion looks particularly attractive due to its epic European assets, superior balance sheet and higher earnings growth prospects.
Canada’s Consumer Lender easy (TSX: GSY) the stock has lost 35% of its market value this year. Although the stock is not seeing a significant rally anytime soon, given recession fears, this could be a prudent time to buy the dip.
A $2 billion goeasy has seen above-average earnings growth over the past few years. Its omnichannel distribution and strong subscription have played well for the growth of its business all these years. As a result, GSY stock has returned over 2000% over the past 10 years, which is well above all TSX stocks.
GSY’s management is quite confident about its earnings outlook for the next few years. It expects a stable increase in its gross consumer loan receivables through 2024. In addition, management aims to generate operating margins above 35% and a return on equity above 22% for the next three years. Note that goeasy has almost always underguided and overshot in the past.
Canada’s Cinema Chain Stock Cineplex (TSX: CGX) has seen some recovery lately due to better than expected results for the third quarter (Q3) of 2022. However, the stock is still trading 30% below its 52-week high in April . CGX stock has supported levels around $8 on several occasions and rallied over the past few months.
Cineplex looks particularly attractive given its long-awaited financial recovery. It reported net profit of $31 million in the third quarter after several quarters of losses and cash burn. Above all, it might not be a one-time thing. Due to several big releases coming up and in the middle of the holiday season, Cineplex will likely see some nice revenue in the current quarter as well.
CGX stock is trading much lower than its pre-pandemic levels. Its high debt load and recession woes could hamper its recovery. However, Cineplex stock looks attractive given its valuation and earnings growth prospects.