3 Undervalued Canadian Stocks to Buy Right Now

Given their improving financials, healthy growth prospects, and attractive valuation, these three Canadian stocks can deliver superior returns over the next three years.

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The Canadian equity markets are scaling new highs every day despite the concerns over high inflation and the ending of quantitative easing measures by the Bank of Canada. The improvement in corporate earnings appears to have boosted investors’ confidence, driving the equity markets higher. Even in this expensive market, you can find few Canadian stocks that are trading at attractive valuations. In this article, we will look at three such stocks.

Air Canada

Air Canada (TSX:AC) could be an excellent bet for long-term investors, with many countries beginning to reopen their borders. Meanwhile, the company has now resumed its service to various destinations worldwide. Besides, the rising vaccination, pent-up demand, improving economic activities, and loyalty programs could boost passenger demand in the coming quarters.

Meanwhile, the company is also strengthening its cargo segment amid rising demand due to e-commerce growth. It is planning to add new aircraft and routes in the coming quarters. Along with these growth initiatives, Air Canada’s cost-cutting initiatives could boost its financials in the coming quarters. With its liquidity standing at $14.4 billion, Air Canada is well-equipped to support its growth initiatives.

Despite its improving financials and healthy outlook, Air Canada currently trades at an attractive forward enterprise value-to-sales multiple of 1.2. I expect Air Canada to deliver superior returns over the next three years.

Suncor Energy

Suncor Energy (TSX:SU)(NYSE:SU) has witnessed strong buying this year amid rising oil demand and improvement in its third-quarter financials. It has returned over 50% for this year. Despite the recent surge, the company still trades at around 24% lower than its January 2020 levels. Also, its forward price-to-sales and forward price-to-earnings stand at 1 and 7.3, respectively, providing excellent buying opportunities.

Meanwhile, analysts are projecting oil prices to remain at elevated levels in the near to medium term due to the rising demand and supply concerns, which could benefit oil-producing companies, such as Suncor Energy. Its increased production, higher refinery utilization rate, and cost-cutting initiatives could boost its financials in the coming quarters.

Amid the improvement in its cash flows, the company is also working on lowering its debt levels while rewarding its shareholders by raising its dividends and the share repurchase program. Meanwhile, its forward yield currently stands at a juicy 5.19%. So, I am bullish on Suncor Energy.

Cineplex

Last week, Cineplex (TSX:CGX) reported a significant improvement in its third-quarter performance. Its revenue increased by 310% to $250.4 million amid the reopening of all its 161 theatre locations covering 1,656 screens. Its box office revenue increased by 547.7% to $94.1 million, while its revenue from the foodservice segment grew by 515.9% to $70.9 million. Also, its other two segments – media and amusement solutions, witnessed robust growth during the quarter.

Cineplex reported a positive adjusted EBITDA of $10.8 million for the quarter, with all of its business units posting a positive number for the first time since the pandemic. Additionally, its average net cash burn also declined from $24 million in the second quarter to $2.9 million.

Meanwhile, the uptrend in Cineplex’s financials could continue amid the easing of capacity restrictions. Additionally, a strong pipeline of upcoming films, signs of life and businesses returning to normalcy, subscription programs, and enhanced safety measures could also drive its sales.

Along with these growth initiatives, its disciplined cash management processes could boost its financials in the coming quarters. Given its healthy growth prospects and an attractive forward EV-to-sales multiple of 1.8, I expect Cineplex to outperform over the next three years.

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.

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

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