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Undervalued Canadian Stocks: August 2023 Edition

ATS stock

The markets have been processing better inflation data for a few weeks now. And while the Dow Jones has had a near-historic run of consecutive days in the green, the gains seem somehow concentrated amongst a small group of mainly US-based tech stocks.

But Canadian analysts think there are some real bargains to be had here too. Here are three undervalued Canadian stocks, according to recent reports from analysts.

Thinkific Labs

After a second quarter that was largely inline with the street’s expectations, National Bank Financial analyst Richard Tse remains bullish on Thinkific Labs (Thinkific Labs Stock Quote, Chart, News, Analysts, Financials TSX:THNC).

Vancouver-based Thinkific creates cloud-based software that allows entrepreneurs and businesses to create, market and sell online courses.

Tse says THNC is making steady strides.

“Thinkific remains uniquely positioned in its course creator/learning market with a notable growth runway that’s fuelled by ARPU drivers –like Thinkific Payments, its App Store and separately an expanded Partnership Network. At 0.6x EV/S on F23E, the risk-to-reward profile continues to look attractive. ”

In a research update to clients August 1, Tse maintained his “Outperform” rating and $3.00 price target on Thinkific Labs, implying a return of 50 per cent at the time of publication.

Volatus Aerospace

After a tough first quarter, Echelon Capital Markets analyst Rob Goff says things are looking up for Volatus Aerospace (Volatus Aerospace Stock Quote, Chart, News, Analysts, Financials TSX:VOL).

Toronto-based Volatus provides integrated drone solutions in North America and globally, with business in the civil, public safety and defense markets and including imaging and inspection, security and surveillance, equipment sales and support and training as well as R&D, design and manufacturing.

In a research update to clients July 31, Goff maintained his “Speculative Buy” rating and one-year price target of $0.90, implying a return of 283 per cent at the time of publication.

“Following a tough Q123, management left full-year 2023 guidance unchanged while highlighting headwinds that led to lower Q123 and Q223 revenues. While some revenues were arguably delayed, we saw some lost revenues in Q123 but expect to see improvements in Q223. We note the Company’s prior reference to a robust sales pipeline where we are optimistic that it will secure significant wins,” Goff said.

ATS Corp

With its stock beaten up because of comments on a GM conference call, now is the perfect time to be buying shares of ATS Corp (ATS Corp Stock Quote, News, Analysts TSX:ATS), says Stifel Canada analyst and Managing Director Justin Keywood.

In a July 26 research report, Keywood reiterated his “Buy” rating and $75.00 one-year price target on ATS. The analyst explained why he thinks the stock will hit that level.

“We maintain our Street high FQ1 revenue estimate at $740mm, up 21% YoY (consensus at $722mm), reflecting conversion of large EV orders, seasonal strength within food & beverage and recent tuck-in acquisitions,” he said. “Our EBITDA estimate of $115mm is in-line with the Street and implied lower margins at 15.5% vs. consensus at ~15.9%. Our bookings forecast mirrors revenue, implying flat growth and book-to-bill of 1.0x. Overall, we see the quarter as relatively sound, given the strong growth period, including FQ2 and favorable valuation back-drop for automation. There are underlying risks developing with ATS, as outlined below, including customer concentration, a lull in bookings growth and pause in material M&A. We continue to monitor these risks but still see a path to our Street high C$75.00 target, given that valuation is not relatively stretched at 13x Fwrd EBITDA and there remains a strong case for new EV contracts and wide M&A opportunity.”

Keywood thinks ATS will generate EBITDA of C$478.7-million on revenue of $2.95-billion in fiscal 2024.

 

Disclosure: Volatus Aerospace is an annual sponsor of Cantech Letter

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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