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3 Undervalued Financial Stocks I Just Added to My Watch List

As value-conscious investors, we are always on the lookout for high-quality stocks that are trading at discounted levels, and the recent weakness in the market has created a plethora of opportunities. With this in mind, let’s take a look at three attractive options from the financial sector that I just added to my watch list and that you could buy today.

1. Home Capital Group Inc.

Home Capital Group Inc. (TSX:HCG) is one of Canada’s leading alternative financial institutions with approximately $20.3 billion in total assets.

At today’s levels, its stock trades at just 6.6 times fiscal 2015’s estimated earnings per share of $4.13 and a mere 6.3 times fiscal 2016’s estimated earnings per share of $4.35, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 9.9 and its industry average multiple of 13.2.

I think Home Capital Group’s stock could consistently trade at a fair multiple of at least eight, which would place its shares upwards of $34 by the conclusion of fiscal 2016, representing upside of about 25% from current levels.

Also, the company pays a quarterly dividend of $0.22 per share, or $0.88 per share annually, which gives its stock a 3.2% yield.

2. Sun Life Financial Inc.

Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF) is the third-largest insurance company in Canada with more than $846 billion in assets under management.

At today’s levels, its stock trades at just 11.9 times fiscal 2015’s estimated earnings per share of $3.56 and only 11 times fiscal 2016’s estimated earnings per share of $3.84, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 17.3 and its industry average multiple of 22.7.

I think Sun Life’s stock could consistently trade at a fair multiple of at least 15, which would place its shares upwards of $57 by the conclusion of fiscal 2016, representing upside of more than 34% from current levels.

In addition, the company pays a quarterly dividend of $0.39 per share, or $1.56 per share annually, which gives its stock a 3.7% yield.

3. Gluskin Sheff + Associates Inc.

Gluskin Sheff + Associates Inc. (TSX:GS) is one of Canada’s largest independent wealth management firms with approximately $8.2 billion in assets under management.

At today’s levels, its stock trades at just 13.1 times fiscal 2016’s estimated earnings per share of $1.56 and only 10.5 times fiscal 2017’s estimated earnings per share of $1.94, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 13.3 and its industry average multiple of 33.

I think Gluskin’s stock could consistently trade at a fair multiple of at least 13, which would place its shares upwards of $25 by the conclusion of fiscal 2017, representing upside of more than 22% from current levels.

Also, the company pays a quarterly dividend of $0.25 per share, or $1.00 per share annually, which gives its stock a 4.9% yield.

Which of these financial stocks belongs in your portfolio?

Home Capital Group, Sun Life Financial, and Gluskin Sheff + Associates are three of the top value plays in their respective industries in the financial sector, and all have the added benefit of dividend yields of over 3%. Foolish investors should take a closer look and consider beginning to scale in to positions in one of them over the next couple of trading sessions.

These three U.S. stocks should be owned by all Canadians...

Looking to expand your portfolio's horizons? The Motley Fool has put together a special FREE report featuring "3 U.S. Stocks Every Canadian Should Own." To get the names and ticker symbols of these three stocks, just click here to access your free copy!

Fool contributor Joseph Solitro has no position in any stocks mentioned.

NEW! This Stock Could Be Like Buying Amazon In 1997

For only the 5th time in over 14 years, Motley Fool co-founder David Gardner just issued a Buy Recommendation on this recent Canadian IPO.

Stock Advisor Canada’s Chief Investment Adviser, Iain Butler, also recommended this company back in March – and it’s already up a whopping 57%!

Enter your email address below to find out how you can claim your copy of this brand new report, “Breakthrough IPO Receives Rare Endorsement.”

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