Let’s take a moment, and talk about bargains – specifically, what makes a particular stock a bargain. There are three main factors to consider: the cost of entry, or the share price of the stock; the expected appreciation, or the upside to the stock; and the dividend, or the immediate return from the stock. It’s tempting to focus on the share price – after all, that’s the sticker price that investors will see first.
Not every cheap stock is a bargain, however. Remember, companies want to price their IPOs as high as possible, both to raise capital and to tell investors that the stock is inherently valuable. Cheap stocks, those priced below $1, have gotten that way for a reason.
The reason is usually simple. Investors have sold them off, driving down the price. They’ve decided that these stocks aren’t worth it, and they’re signaling that to the markets by bidding low. Sometimes, however, a stock that sells for pennies may have a higher potential. Those are the market’s true bargains.
So, yes, you can find bargains in the stock market’s dollar bin. Now the question becomes, where to look? And here, you might want to get creative. New York’s stock exchanges may get all the headlines, but they are not the only game around. Other cities and countries have stock markets, and some of them can make a global splash. The Toronto Stock Exchange, for example, is Canada's premier market for trading equities. And being a smaller market, there’s a greater chance of finding some under-the-radar bargains.
We’ve used the TipRanks Stock Screener tool to pull up three low-cost, downright cheap, stocks traded on the TSE. We’ll take a look at each one through the eyes of some of Wall Street’s top analysts, to find out what makes them buying propositions.
Capstone Mining (TSE:CS)
Canada is a major player in the global mining industry, with a vast land area, sparse population, and enormous proven reserves of natural resources, so it makes sense for us to start with a mining company. Capstone has operations across the America, in Canada, the US, Mexico, and Chile, exploring, developing, and mining gold, silver, copper, zinc, iron, and lead. The company’s main focus is on copper, and its main projects are the Pinto Valley mine in Arizona and the Cozamin mine in Mexico.
Capstone has generated some headlines of its own recently, by releasing its 2020 production guidance. The company puts projected output at 140 to 155 million pounds of copper. In terms of cash cost, Capstone expects to spend between $1.85 and $2 on each pound of salable copper. This projection compares will with 2019’s actual production, that hit the midpoint of the 145 to 160 million pound range expected. Better from an investor perspective, Capstone’s 2019 production costs were well below the $1.80 to $2 range given – so it appears that the 2020 guidance is conservative.
Additional details will be made available on February 11, when the company releases Q4 2019 and full year results. Until then, however, analysts are pleased with the partial figures made public last week.
Dalton Baretto, 4-star analyst with Canaccord Genuity, sees reason for optimism in Capstone’s announcement. He writes, “Production guidance is similar to 2019... Cost guidance is also in line with 2019, and we view this as conservative given the ongoing cost reduction program, anticipated improvements at PV, and the fact that CS beat the low end of guidance in 2019… We continue to like CS for the ongoing optimization at all three assets, the expected growth profile, the leverage to copper prices and the attractive relative valuation.”
Baretto’s price target, C$1.30, suggests room for an impressive 73% upside. In line with this, he has upgraded his stance of CS shares, raising them from Hold to Buy. (To watch Baretto’s track record, click here)
Capstone has a Moderate Buy rating from the analyst consensus, based on 4 Buys and 2 Holds. The stock sells for just C$0.75 per share, but the average price target of C$1.12 implies room for 47% upside growth. (See Capstone’s price targets and analyst ratings on TipRanks)
Nevada Copper (TSE:NCU)
Next up is another mining company. While trading on the TSE, Nevada Copper operates in the US state of Nevada, where it owns the Pumpkin Hollow project. This large-scale, advanced stage mining development has varied metal reserves, including copper, gold, silver, and iron magnetite. The project includes over 10,600 acres of land.
Nevada copper boasts several advantages at Pumpkin Hollow, which give the project excellent prospects for the future. These include varied copper mining approaches, including both underground and open pit mining, and easy access to a skilled workforce. The site is located near the small town of Yerington, which was once known for copper mining.
While mining operations have not yet begun at Pumpkin Hollow, Nevada Copper is ramping up the project. The company announced earlier this month that progress on the ramp-up is meeting expectations, with completion of the East North Vent Shaft and the prospect of full production in Q3 2020. In addition, exploration activities at the open pit site are showing promise. The company plans drilling activities in 2020 to identify and locate recoverable metal deposits.
As production gets going at Pumpkin Hollow, analyst Pierre Vaillancourt of Haywood sees plenty for reason for an upbeat outlook. He writes, “Production at the Pumpkin Hollow mine is underway, on time and slightly over budget due to ground issues. Commercial production is expected in 2Q20, and full capacity production is expected by 3Q20. NCU is well positioned to capitalize on the recovery in the copper price, now at 7-month highs.”
Vaillancourt puts a C$0.60 price target on the stock, indicating a 100% upside – that is, he expects the share price to double this year as the company starts getting copper to market at high prices. Vaillancourt gives NCU a Buy rating. (To watch Vaillancourt’s track record, click here)
With three recent ‘Buy’ analyst reviews, NCU shares have a unanimous Strong Buy from the analyst consensus. Shares are cheap, at just C$0.31 each, but the C$0.87 average price target shows that this stock has plenty of potential growth – there is a 180% upside here. (See Nevada Copper’s stock-price forecast at TipRanks)
Score Media and Gaming (TSE:SCR)
From mining, we move online Score Media and Gaming is a digital sports betting and media company, with several apps available for PCs and mobile devices. The apps deliver sports scores, data, and news, as well as connected fans to fantasy leagues and betting venues.
Online gaming, of any sort, is lucrative, and SCR saw gains in fiscal 2019. The company posted $31.1 million in revenues, up 12% from the previous year and a new record for the company.
Revenue gains were supported by 6% Q4 growth in monthly average users, to 272 million. This number includes users on both the iOS and Android apps, and represents 75 app sessions per user each month. Content reach on the company’s social media channels was also strong in the final quarter, hitting 142 million. The reach number indicates 150% year-over-year growth.
Q1 fiscal 2020 also showed strong growth results. Revenue came in at $9.2 million, and user sessions on the apps reached 523 million, to 123 sessions-per-user-per-month. While still a relatively small online gaming and betting company, SCR is rapidly expanding its footprint.
Cormark analyst David McFadgen is bullish on the stock, especially at its current price. He writes of the company’s prospects, “We recommend theScore given the massive opportunity in front of it with respect to US sports betting. What makes theScore interesting, in our opinion, is its active user base of approximately 4.0 MM (2.6 MM are in the US) and the potential to convert a lot of these to bet on sports.”
McFadgen reiterates his Buy rating here, and sets a $1.10 price target, indicating room for a 46% upside potential. (To watch McFadgen’s track record, click here)
Score Media and Gaming is another company with a unanimous Strong Buy analyst consensus, this one based on 3 Buy ratings. Shares sell for a mere C$0.77, and the C$1.07 average price target suggests an upside potential of 39% from current levels. (See Score Media's price targets and analyst ratings on TipRanks)