July 2024 Insight into three TSX stocks that are performing below forecasts

Amid a robust first half of 2024, which saw the TSX Index post solid gains, albeit with less exposure to the emerging technology sector, investors may find potential in exploring areas that do not reflect these broader market trends. In this context, identifying stocks that are considered undervalued could offer interesting opportunities for those looking to diversify or adjust their portfolio to current economic conditions and market movements.

The 10 most undervalued stocks in Canada based on cash flow

Click here to see the full list of 24 stocks from our Undervalued TSX Stocks Based on Cash Flows screener.

Let’s review some notable picks from our reviewed stocks

Overview: Constellation Software Inc. operates globally and acquires, builds and manages vertical software companies primarily in Canada, the United States and Europe with a market capitalization of approximately C$85.68 billion.

Operations: The company’s revenue in the software and programming segment is 8.84 billion Canadian dollars.

Estimated discount to fair value: 27.9%

Constellation Software trades at CA$4036.72, 27.9% below its estimated fair value of CA$5596.48, suggesting an undervaluation based on cash flows. Despite high levels of debt, the company is poised for robust growth. Earnings are expected to increase significantly over the next three years, outperforming the Canadian market average. Recent strategic leadership changes and the launch of Omegro indicate an increased focus on global software solutions expansion and operational efficiency. However, the last quarter saw significant insider selling, which may raise concerns among investors.

Overview: Endeavour Mining plc is a gold mining company in West Africa with a market capitalization of approximately C$7.38 billion.

Operations: The Company’s main revenues are generated from four mines in West Africa: Ity Mine (CA$653.70 million), Mana Mine (CA$292.70 million), Houndé Mine (CA$611.30 million) and Sabodala Massawa Mine (CA$548.40 million).

Estimated discount to fair value: 42.1%

Endeavour Mining is significantly undervalued by more than 20% at CA$30.41, with a fair value estimated at CA$52.48. Despite recent operational challenges, reflected in a net loss of $20.2 million in the first quarter of 2024, the company is on track to meet its annual production guidance and has promising growth prospects, with expected revenue growth outpacing the Canadian market average. However, dividend coverage by earnings and cash flows remains weak, raising sustainability concerns.

Overview: Trisura Group Ltd. is a specialty insurance provider with surety, risk solutions, corporate insurance and reinsurance operations in Canada, the United States and internationally and has a market capitalization of approximately C$1.98 billion.

Operations: The company generates its revenue from its operations in the United States and Canada: 2.04 billion Canadian dollars in the United States and 900.81 million Canadian dollars in Canada.

Estimated discount to fair value: 48.2%

Trisura Group is trading at CA$41.55 below its estimated fair value of CA$80.18, suggesting a potential undervaluation of over 20%. Despite significant insider selling and shareholder dilution over the past year, Trisura’s earnings are up 385% year-on-year and are expected to continue to grow significantly. Recent management changes are aimed at strengthening the North American operations, suggesting strategic positioning for sustainable growth amidst this financial momentum.

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This Simply Wall St article is of a general nature. We provide commentary based solely on historical data and analyst forecasts, using an unbiased methodology. Our articles are not intended as financial advice. They do not constitute a recommendation to buy or sell stocks, and do not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

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