3 Undervalued Canadian Stocks to Buy Right Now

Rajiv Nanjapla
·4 min read
edit Person using calculator next to charts and graphs

Improving corporate earnings, expansionary monetary policies, and optimism over the reopening of economies have driven the Canadian equity markets higher, with the S&P/TSX Composite Index rising 15.7%. However, even in this expensive market, there are few undervalued stocks that provide excellent buying opportunities. So, let’s look at three such companies that could outperform the broader equity markets over the next two years.

Canadian Natural Resources

After witnessing a steep fall last year, oil prices have bounced back to trade above US$70/barrel. Growing oil demand amid the gradual reopening of economies and supply constraints have pushed oil prices higher, benefiting oil-producing companies, such as Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ), which has returned 45.9% this year. Despite the steep rise, the company’s valuation looks attractive. Its forward price-to-earnings and price-to-book multiples stand at 11.5 and 1.6, respectively.

Oil prices could remain elevated in the near to medium term. Meanwhile, B of A Global Research projects oil prices could even rise to US$100/barrel next year amid tighter oil supply and growing demand. The company has planned to invest $3.2 billion this year, increasing its production by 5% from its 2020 levels. So, higher realization price and increased production could drive the company’s financials and stock price higher.

Further, Canadian Natural Resources has also been rewarding its shareholders by raising its dividend consistently for 21 previous years. Currently, it pays a quarterly dividend of $0.47 per share, with its forward yield standing at 4.21%. So, I believe Canadian Natural Resources would be an excellent buy right now.

Air Canada

Amid the widespread vaccination and falling COVID-19 cases, Air Canada (TSX:AC) is witnessing a substantial buying this year, with its stock price increasing by 17.6%. However, despite the increase, the company still trades significantly lower than its pre-pandemic levels. Further, the company’s valuation also looks attractive, with its forward price-to-sales multiple standing at one.

The ongoing vaccination drive could prompt the Canadian government to ease some of the harsh travel restrictions, boosting passenger demand. Further, Canadian citizens are sitting on huge capital, which they had saved for an emergency. With the economy bouncing back strongly, I expect these saving could go towards travel and leisure, benefiting Air Canada.

Air Canada’s cargo vertical has continued to deliver strong performance. Further, the company has planned to expand its operations to international routes by adding two of its retired passenger aircraft this year. The company’s financial position also looks strong with the aid of $5.9 billion from the Canadian government. So, Air Canada is well equipped to ride out this crisis and deliver superior returns over the medium term.

Cineplex

Cineplex (TSX:CGX) is another stock that has witnessed a substantial buying this year, with its stock price rising over 70%. However, the company is still trading over 50% lower than its January 2020 levels. Also, its forward price-to-sales multiple stands at an attractive 0.9. Meanwhile, Cineplex has strengthened its financial position by raising funds through various debt facilities and selling and leasing back its headquarter. It has taken several cost-cutting initiatives, such as slashing the workforce and reductions in rent payments through renegotiations. So, the company is well funded to ride out this crisis.

Further, the easing of restrictions and reopening of entertainment avenues could improve theater attendance. The pent-up demand and the postponement of movie releases from last year to this year could boost the company’s financials in the coming quarters. So, given its attractive valuation and improving economic activities, I expect Cineplex to deliver higher returns over the next two years.

The post 3 Undervalued Canadian Stocks to Buy Right Now appeared first on The Motley Fool Canada.

For similar wealth-creating ideas, check out the following report.

Motley Fool Canada Makes 5G Buy Alert

5G is one of the greatest arrivals in technology since the birth of the internet. We could see plenty of new wealth-building opportunities in 2021 that would potentially dwarf any that came before them.

5G has the potential to radically change our lives and society as we know it, but if you’re an investor, the implications are even greater — and potentially much more lucrative.

To learn more about it and its revolutionary potential to change the industry — and potentially your bank account — click on the link below to get the full scoop.

Learn More Today!

More reading

The Motley Fool recommends CINEPLEX INC. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.

2021

  • Up next
  • Up next
  • Up next
  • Up next

Latest Stories

  • Dairy cattle must be tested for bird flu before moving between states, agriculture officials say

    Dairy cattle moving between states must be tested for the bird flu virus, U.S. agriculture officials said Wednesday as they try to track and control the growing outbreak. The federal order was announced one day after health officials said they had detected inactivated remnants of the virus, known as Type A H5N1, in samples taken from milk during processing and from store shelves. They stressed that such remnants pose no known risk to people or the milk supply. “The risk to humans remains low,” s

  • Israeli push to legalize settlements in West Bank 'dangerous and reckless,' US says

    Legalizing settler outposts in the Israeli-occupied West Bank would be "dangerous and reckless," the U.S. State Department said on Wednesday in response to reports Israel's Finance Minister Bezalel Smotrich was pushing to do so. Times of Israel reported that Smotrich wanted to begin the process of legalizing 68 illegal outposts in the West Bank, calling it "one of the most dramatic expansions" for the settlement movement in decades. "These reports about directives to support illegal outposts in the West Bank, we believe that to be dangerous and reckless," State Department deputy spokesperson Vedant Patel said in a daily briefing.

  • Federal ministers visit Sunshine Coast to detail $4 billion in reconciliation commitments

    Over $4 billion of this year's federal budget will go towards advancing Indigenous reconciliation. shíshálh Nation lhe hiwus yalxwemult (Chief Lenora Joe) and hihewus (councillors) were joined by Terry Beech, Minister of Citizen Affairs, Mark Holland, Minister of Health and Patrick Weiler, MP for West Vancouver–Sunshine Coast–Sea to Sky Country on April 23 at the tems swiya Museum to highlight measures of this year's budget that will have a significant impact for Indigenous communities. Weiler r

  • Why Trump's hush money scandal is a criminal case

    As witness testimony begins in former President Donald Trump’s hush money trial, Yahoo News Senior Editor David Knowles explains why the charges of falsifying business records — which would typically be considered a misdemeanor in New York state — have been elevated to criminal offenses in the eyes of the prosecution.

  • ’Are you Eric Adams?!’ Watch plane passenger berate NYC mayor on a flight from Miami

    The former cop was a speaker at a summit at the University of Miami

  • Stock market today: Tesla soars as most of Wall Street drifts in mixed trading

    NEW YORK (AP) — U.S. stocks are drifting Wednesday, as Wall Street’s big week so far lets off the accelerator. The S&P 500 was 0.1% higher in afternoon trading. Its two-day winning streak to start the week erased nearly two-thirds of last week’s steep loss. The Dow Jones Industrial Average was down 19 points, or 0.1%, as of 2:02 p.m. Eastern time, and the Nasdaq composite was 0.3% higher. Tesla soared 11.6% after saying the night before that it would accelerate production of new, more affordable

  • US House Democrat Donald Payne Jr. dead at 65

    Donald Payne Jr., a Democrat in the U.S. House of Representatives who represented a northern New Jersey district, has died after a cardiac episode, the state's governor's office said on Wednesday. "As a former union worker and toll collector, he deeply understood the struggles our working families face, and he fought valiantly to serve their needs, every single day," Governor Phil Murphy said in a statement. "Our prayers are offered today for his family and friends, and especially his wife, Bea, and their three children," Speaker Mike Johnson, a Republican, said.

  • A day later, 'The Save' still had Panthers marveling at Bobrovsky's NHL playoff heroics

    In the moment, The Save kept the game tied. “There'll be a number of kids in the driveway this weekend and they'll all want to play goal for the first time,” Maurice said. The hyperbole kept coming Wednesday: Bobbery, some were calling it, a play on Bobrovsky's last name and obvious nickname — Bob.

  • Dechinta Centre for Research and Learning receives $5 million in federal funding

    The 2024 federal budget includes a $5 million contribution to Yellowknife’s Dechinta Centre for Research and Learning. Kelsey Wrightson, the school’s executive director, said she and her team were thrilled to learn about the new funding when it was announced on Tuesday, April 16. “We’re feeling really excited,” she said. “I was sitting at my desk on Tuesday waiting for the budget announcement, and then when we got the news, I felt not only a huge amount of relief, but also the responsibility of

  • Israel's Netanyahu says 'more has to be done' to stop pro-Palestinian protests on US campuses

    Israeli Prime Minister Benjamin Netanyahu said on Wednesday "more has to be done" to stop pro-Palestinian protests that have spread across U.S. campuses in recent weeks. "What's happening in America's college campuses is horrific," he said in a recorded statement, accusing "antisemitic mobs" of taking over leading universities. Protests over Israel's actions in Gaza have intensified across U.S. campuses in recent weeks with the Gaza war now in its seventh month.

  • Zendaya reveals why it’s ‘terrifying’ to go to the Met Gala

    ‘Going up the steps is very daunting,’ Zendaya says about the fashion event

  • GoFundMe established for pregnant wife, ‘close-knit family’ of slain Ada County deputy

    “Tobin’s life has been a reflection of God’s grace,” according to a statement provided by the family. “He was a selfless man of conviction, giving God the glory in all circumstances.”

  • Markham city councillor Ritch Lau to host charity concert

    Markham Ward 2 Councillor Ritch Lau is stepping into a new spotlight, hosting his first charity concert on April 28 at the Flato Markham Theatre. Before running for council, Lau worked as a radio host, then transitioned to become a news reporter and TV news anchor for Fairchild TV. He is a household name known by Chinese families nationwide. As the first sitting city councillor to take the stage for a solo concert, Lau is merging his passion for public service with his lifelong love for music. D

  • Girl arrested after two teachers and pupil stabbed at south Wales school

    Police say three were taken to hospital after incident at Amman Valley school and teenager held on suspicion of attempted murder

  • After long battle over Ukraine aid, Mitch McConnell says largest foes were outside Congress

    Mitch McConnell blamed Donald Trump and Tucker Carlson for the delayed passage of Ukraine aid included in Tuesday's $95 billion foreign aid package.

  • Steve Diamond: Newcastle’s bus ride home from Bristol demolition like a six-hour funeral

    Newcastle Falcons’ bus journey back from Bristol was described as “like going to a funeral for six hours” by their consultant director of rugby, Steve Diamond, after the club were defeated 85-14 on Sunday.

  • UNCG provost to step down as she battles cancer, stands by controversial program review

    UNC Greensboro’s provost shared her breast cancer diagnosis as the school announced her departure.

  • Steve Carell confirms new Netflix show following Space Force axe

    Steve Carell has joined forces with Mean Girls' Tina Fey for new Netflix comedy The Four Seasons, following the axe of his show Space Force.

  • Jerry Seinfeld Jokes He 'Enjoyed' When Larry David Attacked Elmo on “Today”: 'Even Treasures Need a Beating'

    In February, David shocked audiences when he surprise attacked the Sesame Street character live on the 'Today' show

  • The Scenario May Be Different, but Prada Group Continues to Grow

    Group CEO Andrea Guerra said “sharpness of positioning, creativity and communication will be critical this year, when we will observe a different kind of market and trends."