We recently published a list of The 7 best Canadian stocks under $20. In this article, we take a look at how Bausch Health Companies Inc. (NYSE:BHC) compares to the other Canadian stocks under $20.
What is happening in the Canadian stock market?
The Canadian economy is beginning to calm down as inflation is steadily declining and the Bank of Canada is also pursuing a looser monetary policy, paving the way for stronger economic growth in the future. On July 19, Reuters reported that the Bank of Canada had cut its overnight interest rate by 25 basis points to 4.5%, as it expected inflation to continue to fall.
Inflation rates in Canada have fallen slightly more than expected, making rate cuts more likely. According to Reuters, the consumer price index (CPI) for June 2024 fell to 2.7% on July 16, a 0.1% month-on-month decline, paving the way for a rate cut.
As a result of the rate cut, the Canadian stock market performed better. On August 16, Reuters reported that the Canadian stock index closed higher on Friday, posting its biggest weekly gain of the year. Investors worldwide cheered recent signs of economic resilience in the United States, and recent record gold prices also gave a boost to the mining sector.
The S&P/TSK Composite Index closed up 0.1% at 23,054.61, snapping a seven-day winning streak that was the longest daily winning streak since April 2023.
On a sector analysis, the materials group, which consists of metal ore and fertilizer companies, rose 1.5%, while gold prices rose 2% to an all-time high. In addition, the financial market, which contributed 29% to TSK’s weighting, grew 0.6%. However, the energy sector was a drag, falling 1.1% on lower oil prices, which settled at $76.65, 1.9% lower than expected. The weaker oil price was mainly due to lower demand from China.
On August 13, Ross Healy, Chairman of Strategic Analysis Corporation and Portfolio Manager at MacNicol & Associates Asset Management, spoke on Bloomberg about the performance of TSK and the U.S. stock market. Ross Healy mentioned that the Canadian stock market trades at 1.5 times its adjusted book value, while the NASDAQ trades at 9.5 times its book value. Mentioning these numbers, Ross Healy stated that the Canadian stock market appears more lucrative for investors looking to invest for 5 years or more due to its growth potential and the stock portfolio it offers.
Ross Healy also believes that we have had a US advantage for a long time and the market is now moving towards a Canadian advantage. In addition, the precious metals and gold options in the TSK index ensure that the market is positioned for long-term growth. Ross Healy, who made his bullish case for gold companies, mentioned that companies that have a lot of cash on their balance sheets and have been able to find underdeveloped projects to work on have been successful compared to their competitors.
Our methodology
To compile the list of top 7 Canadian stocks under $20, we used the Finviz screener. We used the screener to filter out Canadian stocks that were trading below $20 and sorted them by their market capitalization to get a consolidated list of stocks. Next, we ranked these stocks based on the average upside price target according to Wall Street analysts. The stocks are ranked in ascending order of the average upside price target as of August 18. In addition, 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 invest in. The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (Further details can be found here).
A row of pharmaceutical and medical products in a warehouse showing the range of products available.
Bausch Health Companies Inc. (NYSE:BHC)
Average upside target as of August 18: 39.62%
Share price as of August 18: USD 5.73
Bausch Health Companies Inc. (NYSE:BHC) is a global healthcare company that develops and sells pharmaceuticals and medical devices in the United States, Canada, and internationally. The company operates through several business segments, namely Salix, International, Solta Medical, Diversified, and Bausch + Lomb.
To understand the company’s products, one must look at what each segment of Bausch Health Companies Inc. (NYSE:BHC) does. The Salex segment focuses on gastroenterology products in the United States, while the company’s International segment sells a range of medical devices and pharmaceuticals in the global market. Additionally, the Solta Medical and Bausch + Lomb segments specialize in medical devices and eye care products, respectively. Finally, the Diversified segment offers a variety of pharmaceutical products, including generic drugs and dental products. Overall, Bausch Health Companies Inc. (NYSE:BHC) is a consolidated healthcare company with offices and customers worldwide.
Bausch Health Companies Inc. (NYSE:BHC) reported a successful second quarter of 2024. Net sales increased 6% year-over-year to reach $1.19 billion (excluding Bausch + Lomb) on an organic basis. Sales growth was driven by organic growth across all segments, led by Xifaxan (a drug that belongs to the Salix segment), which grew 10% year-over-year. Xifaxan made the Salix segment the largest revenue contributor, generating over $557 million in sales.
Regionally, Asia Pacific was one of the strongest markets, growing 19% in the quarter. Within Asia Pacific, South Korea saw revenues nearly double year-on-year, and China and Taiwan also saw double-digit organic growth.
Sales growth is impressive and the company has established itself well internationally. But even more remarkable is the company’s ability to increase its earnings for the fifth consecutive year. The company’s adjusted EBITDA increased 8% year-over-year to $614 million. Bausch Health Companies Inc. (NYSE:BHC) also generated strong operating cash flow of $380 million during the quarter, primarily due to improved business performance and favorable working capital trends.
Bausch Health Companies Inc. (NYSE:BHC) is a good investment. Not only was its last quarter a success, but the company has also grown its revenue by 2% and increased its free cash flow by 14% over the past 10 years. BHC is also cheap at current levels. It is trading at just 2 times its forward earnings, which represents a 93% discount to its sector. Moreover, its earnings are expected to grow 2% over the year to $1.04. 8 analysts have a consensus Buy view on the stock, with a median price target of $8, implying a 39.62% upside potential from current levels.
Total BHC 5th place on our list of the best Canadian stocks under $20. While we recognize BHC’s potential as an investment, we believe AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than BHC but trades at less than 5x earnings, read our report on the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
