We recently compiled a list of the 7 Best Canadian Stocks Under $20. In this article, we are going to take a look at where Bausch Health Companies Inc. (NYSE:BHC) stands against the other Canadian stocks under $20.
What’s Happening in the Canadian Stock Market?
The Canadian economy is beginning to settle down as inflation is on a steady downward trend and the Bank of Canada has also taken an easier policy stance, thereby paving the way for stronger economic growth moving forward. On July 19, Reuters reported that the Bank of Canada cut its overnight interest rates by 25 basis points to 4.5% based on the expectation that inflation will continue to fall.
Inflation rates in Canada cooled a little more than expected making interest rate cuts more likely. On July 16, as per Reuters, June 2024 Consumer Price Index (CPI) cooled down to 2.7% a 0.1% decrease month-over-month thereby paving the way for an interest rate cut.
As a result of the interest rate cut, the Canadian stock market was seen performing better. On August 16, Reuters reported that the Canadian stock index ended higher on Friday and witnessed its biggest weekly advance of the year. Investors globally have been cheering the recent signs of the US economic resilience and the recent record high gold prices also boosted the mining sector
The S&P/TSK composite index ended up 0.1% at 23,054.61, posting a seven-day gain streak, recorded as the longest daily winning streak since April 2023.
Looking at a sectoral analysis, the materials group that comprises metal minerals and fertilizer companies was up 1.5% as the price of gold went up by 2% to an all-time high. Moreover, the financial market, which contributed 29% to TSK weighting, grew by 0.6%. The energy sector was a drag, however, and fell 1.1% due to lower oil prices, which settled at $76.65 1.9% lower than expected. The weaker price of oil was mainly attributed to slower demand from China.
On August 13, Ross Healy, chairman of Strategic Analysis Corporation and portfolio manager at MacNicol & Associates Asset Management, appeared on Bloomberg to discuss the performance of TSK and the US stock market. Ross Healy, mentioned that the Canadian stock market is trading at 1.5 times its adjusted book value, whereas the NASDAQ is trading at 9.5 times its book value. Mentioning these numbers Ross Healy, stated that for investors looking to invest for 5 years or longer, the Canadian stock market looks more lucrative due to its potential for growth and the portfolio of stocks it has to offer.
Ross Healy, further believes that we have had a long US advantage and now the market is heading towards a Canadian advantage. Moreover, the precious metal and gold options in the TSK index make the market poised for growth in the long term. Ross Healy, while stating his bull case for gold companies mentioned that companies that have good money on their balance sheets and have been able to find underdeveloped projects to work on have been successful when compared to their competitors.
Our Methodology
To compile the list of 7 best Canadian stocks under $20 we used the Finviz screener. We used the screener to filter out Canadian Stocks that were trading under $20 and sorted them by their market capitalization to get a consolidated list of stocks. Next, we ranked these stocks based on the average price target upside as per Wall Street analysts. The stocks are ranked in ascending order of the average price target upside, as of August 18. Moreover, we have also mentioned the share price of each stock as of August 18, 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A series of pharmaceutical and medical products in a warehouse, displaying the range of products available.
Bausch Health Companies Inc. (NYSE:BHC)
Average Price Target Upside as of August 18: 39.62%
Share Price as of August 18: $5.73
Bausch Health Companies Inc. (NYSE:BHC) is an international healthcare company that develops and sells pharmaceuticals and medical devices in the United States, Canada, and Internationally. The company operates through various business segments namely Salix, International, Solta Medical, Diversified, and Bausch + Lomb segments.
To understand the products of the company it is necessary to discuss what each segment of Bausch Health Companies Inc. (NYSE:BHC) does. The Salex segment focuses on gastroenterology products in the U.S., whereas the International segment of the company sells a range of medical devices and pharmaceuticals to the global market. Moreover, the Solta Medical and Bausch + Lomb segments specialize in medical devices and eye care products, respectively. Lastly, the Diversified segment offers a variety of pharmaceutical products, including generic and dental products. Overall, Bausch Health Companies Inc. (NYSE:BHC) is a consolidated healthcare company with operations and clients worldwide.
Bausch Health Companies Inc. (NYSE:BHC) posted a successful second quarter of 2024. Its net revenue grew 6% year-over-year to reach $1.19 billion (excluding Bausch + Lomb) on an organic basis. Revenue growth was on the back of organic growth across the board, led by Xifaxan (a medicine that comes under the Salix segment) which grew 10% year-over-year. Xifaxan made Salix segment the top contributor in revenue generating more than $557 million in revenue.
Regionally, Asia Pacific was one of the strongest markets with 19% growth during the quarter. Within Asia Pacific, South Korea witnessed almost double the business as compared to last year and China and Taiwan posted high teens organic growth as well.
While revenue growth is impressive with the company making a strong footing internationally. What’s more notable is its ability to grow its earnings for the fifth consecutive year. The adjusted EBITDA of the company increased 8% year-over-year and amounted to $614 million. Bausch Health Companies Inc. (NYSE:BHC) was also able to generate a strong operating cash flow of $380 million during the quarter mainly because of the improved business performance and favorable working capital movement.
Bausch Health Companies Inc. (NYSE:BHC) is a good investment to consider. Not only was the last quarter a success, the company has been growing its revenue by 2% and levered free cash flow by 14% during the past 10 years. BHC is also cheap at current levels. It is trading at only 2 times its forward earnings, which is a 93% discount to its sector. Moreover, its earnings are expected to grow by 2% during the year to reach $1.04. 8 analysts have a consensus Buy opinion on the stock with their median price target of $8 presenting an upside of 39.62%% from the current level.
Overall BHC ranks 5th on our list of the best Canadian stocks under $20. While we acknowledge the potential of BHC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BHC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.