Best Buy of the Day: Scotiabank | The Motley Fool Canada
Bank stocks have rebounded strongly as the vaccine rollout gains momentum in Canada. Yes, when it comes to undervalued stocks, I’m talking mostly about non-financial companies. However, I think Bank of Nova Scotia (TSX: BNS) (NYSE: BNS) is not getting the respect it deserves from the market right now, even after its strong fourth quarter results.
Of course, there might be some risk associated with this action compared to its peers. However, it looks like there could be a great opportunity for investors starting today.
Scotiabank international exposure is optimistic for investors
Although emerging markets are riskier than developed markets, the former is much more rewarding. Indeed, they have the capacity to generate returns above the market in the long term. Therefore, when the opportunity arises to gain access to this exposure on the cheap, investors must cash in. The Bank of Nova Scotia is Canada’s third largest bank and is a clear winner when it comes to global ambition.
Recently, the company has made various acquisitions which have helped to diversify its activities outside of Canada. Indeed, the increased presence of the lender in Mexico, the Caribbean and parts of South America, which include Chile, Peru and Colombia, is now optimistic for growing investors.
In addition, this bank has an efficient management team with great strategic foresight. I think Scotiabank remains the best option for investors today to gain exposure to the international banking services of a Canadian bank.
Scotiabank is a great income game
The company gets a return on equity of 11% and grew its profits at a compound rate of 5% between 2008 and 2020. Yes, its ROE is lower than that of other major banks in Canada. However, I believe Scotiabank’s exposure to emerging markets will continue to provide long-term growth on this metric.
Of the six major Canadian banks, this company has the most exposure to emerging markets, which are growing at an accelerating pace. Between 2018 and 2019, this company made a number of buyouts, including two large asset management companies, namely MD Management and Jarislowsky Fraser.
The company has halted some non-essential operations that have created headwinds in recent times. Therefore, these cost-cutting measures should free up capital and allow Scotiabank to focus on its most profitable businesses. Indeed, I think these changes will be very positive for the image of the company’s long-term profits.
In addition, these measures will also allow the company to finance more acquisitions and increase its dividend. At the time of writing, Scotiabank had a market cap of $ 94 billion and a valuation multiple of 14.5 times its earnings. This represents a great opportunity for investors today.
Do you like this first choice? Here are 10 more to consider now:
The 10 best stocks to buy this month
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool service or advisor. We are Motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we’re posting sometimes articles that may not conform to recommendations, rankings or other content.
Silly contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.