Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

This 1 Cheap TSX Stock Could Explode in September 2021

Stock MarketsAug 31, 2021 17:45
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
This 1 Cheap TSX Stock Could Explode in September 2021

As Canadian stocks are about to end the seventh consecutive month on a positive note, investors are consistently seeking opportunities to gain from the ongoing market rally. While some fundamentally strong but cheap stocks rallied in August, not all of them look like they’re worth buying right now. In this article, I’ll highlight one of the top TSX gainers from August — Primo Water (TSX:PRMW)(NYSE:PRMW) — that I expect to post stronger gains in September 2021 and beyond.

Primo Water stock Primo Water stock rose by nearly 9% in August against a nearly 1.5% rise in the TSX Composite Index. The company’s stronger-than-expected second-quarter results — released in the first week of August — could be the main reason for its sharp share price gains.

It’s a Florida-based water solutions firm that mainly focuses on delivering bottled water and water dispensers to homes and offices. While the company makes most of its revenue from the United States market, the United Kingdom and Canada are also among its other key markets.

Strong growth trend In Q2, Primo’s revenue rose by 15% YoY (year over year) to US$526 million — higher than analysts’ estimates of US$505 million. With this, the company’s second-quarter adjusted earnings jumped to US$0.17 per share compared to only US$0.08 per share in the same quarter a year ago. Its adjusted net profit margin also expanded significantly to 5.2% in the last quarter from 1.9% in the previous quarter and 2.9% a year ago.

Primo’s management highlighted surging demand from residential customers and continued recovery in its commercial customer base as some of the key reasons that boosted its sales and profitability in the last quarter.

Raised full-year outlook In the June quarter, Primo’s adjusted EBITDA rose by 20.6% YoY to US$ 99.5 million. After witnessing a strong sales and profit growth trend in the first half of the year, the company raised its full-year adjusted EBITDA outlook. Now, it expects its 2021 adjusted EBITDA to be between the range of US$390 and US$400 million, reflecting roughly 10% growth over the previous year.

I expect the company’s commercial customer base to continue showcasing a sharp recovery in the coming quarters amid reopening businesses and offices. This factor could keep its solid financial recovery trend intact going forward.

Another reason to buy this cheap TSX stock Primo Water’s share price rose by just 12.5% last year after the COVID-19-related negative factors caused an 18.4% drop in its 2020 revenue. Despite gradual recovery in its sales and consistently positive earnings growth this year, its stock is still underperforming the broader market. In 2021 so far, the stock has risen by only 12.2% to $22.42 per share compared to more than an 18% rise in the TSX Composite benchmark.

Interestingly, the company has been beating Street analysts’ earnings expectations by a wide margin for the last seven quarters in a row. Given its stellar earnings growth trend and continued business recovery, I find its stock cheap. That’s another reason why I expect Primo Water stock to continue soaring and outperforming the broader market by a wide margin in the coming months after its rally started in August.

The post This 1 Cheap TSX Stock Could Explode in September 2021 appeared first on The Motley Fool Canada.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

This Article Was First Published on The Motley Fool

This 1 Cheap TSX Stock Could Explode in September 2021
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email