2 Top Undervalued Canadian Stocks to Buy in 2021

Suncor and Enbridge are two top Canadian stocks to buy if you are looking for undervalued picks on the TSX right now.

| More on:
Value for money

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The S&P/TSX Composite Index is trading close to its all-time high these days, making it seem like the market is in overvalued territory and at risk of a substantial correction. Many Canadian stocks are trading at pre-pandemic levels or have reached new all-time highs.

In a market that seems expensive, it almost looks impossible to find discounted stocks that could become excellent value investments in your portfolio in the long run. However, there are a few Canadian stocks that are still trading for far less than pre-pandemic valuations.

I will discuss two such stocks that could be worth adding to your portfolio to enjoy stellar long-term returns.

Suncor Energy

Suncor Energy (TSX:SU)(NYSE:SU) is first on my list. The stock fell drastically because of the oil price crisis, and the lowered demand for crude oil amid the pandemic made it fall even more. At writing, Suncor is trading for $28.24 per share, and it is still trading for a 35% discount from its January 2020 share prices.

With a 1.64 price-to-sales ratio, Suncor looks like an attractive stock pick. Its first-quarter earnings report also posted impressive numbers, making it an even more attractive stock to consider. Suncor’s revenue from operations rose to $746 million from $421 million as production increased. The company’s funds from operations increased to $2.11 billion from $1 billion.

Improving economic activities worldwide could drive oil prices higher and fuel demand, allowing Suncor to improve its balance sheet further.


Enbridge (TSX:ENB)(NYSE:ENB) is my second pick for undervalued Canadian stocks that you can buy this year. Enbridge also took a heavy tumble due to the oil price crisis and the economic fallout from COVID-19. It has only recently started to recover, but the stock is trading well below its pre-pandemic share prices.

Enbridge boasts a 2.50 price-to-sales ratio, making it an attractive asset to consider adding to your portfolio. The stock is trading for $48.43 per share and boasts a juicy 6.90% dividend yield. Despite the challenges posed by the pandemic, Enbridge posted impressive numbers in its latest quarterly earnings report. The company generated $2.6 billion in cash from its operating activities, providing a much-needed boost to its balance sheet.

As the vaccine rollout continues, governments worldwide are looking to reopen their economies. The improvement in economic activities worldwide is leading to increased oil demand. More demand means that Enbridge can improve its asset utilization rate and boost its financials further.

Foolish takeaway

Buying on the dip on beaten-down stocks in a market that seems to be doing so well might sound like a risky move. However, some stocks never managed to recover to pre-pandemic valuations due to unfavourable conditions.

As the markets recover and consumer demand returns to relative normalcy, battered and bruised stocks trading on the TSX might finally get the chance to recover. I believe that Suncor and Enbridge could be excellent additions to your portfolio for undervalued stocks in a seemingly overvalued market.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.

More on Dividend Stocks

protect, safe, trust
Dividend Stocks

3 Safe Stocks for Beginners Amid Rising Volatility

Given their stable cash flows and healthy growth potential, these three safe stocks are excellent buys for beginners.

Read more »

money cash dividends
Dividend Stocks

Market Correction: 2 Oversold TSX Dividend Stocks to Buy for Total Returns

These top value stocks pay attractive dividends and look cheap to buy for a TFSA or RRSP focused on total…

Read more »

Dividend Stocks

2 Undervalued TSX Dividend Stocks to Buy in July

These unloved TSX dividend stocks could deliver attractive returns in the back half of 2022.

Read more »

sad concerned deep in thought
Dividend Stocks

$20 Billion Telco Merger: More Concessions and Conditions Ahead?

The mediation process in the proposed telco merger could lead to more concessions and conditions before the competition watchdog grants…

Read more »

Dividend Stocks

RRSP Investors: 2 Cheap TSX Dividend Stars to Buy for Total Returns

RRSP investors seeking attractive total returns can now buy top TSX dividend stock with high yields at discounted prices.

Read more »

rail train
Dividend Stocks

Canadian Pacific Railway (TSX:CP): A Top Wide-Moat Stock to Buy and Hold Forever

CP Rail keeps the goods moving around the country. Here’s why it’s a great pick for new investors.

Read more »

Businessmen teamwork brainstorming meeting.
Dividend Stocks

The 3 Top Large-Cap Stocks for TSX Investors

Have peace of mind by investing in top large-cap stocks during this market correction. Start researching BAM (TSX:BAM.A)(NYSE:BAM)!

Read more »

Golden crown on a red velvet background
Dividend Stocks

3 Dividend Aristocrat Stocks to Buy and Hold Forever

Three Dividend Aristocrats are excellent holdings for new and old investors with long-term financial goals.

Read more »