Canadian stocks have hit a recent patch of volatility. Despite that, many stocks are still trading at lofty valuations. Fortunately, there are always opportunities to pick up quality stocks before the market recognizes it. If you are looking for some undervalued stocks with upside in 2022, here are four that look like buys now.
Enbridge: A top Canadian dividend stock
Enbridge (TSX:ENB)(NYSE:ENB) has one of the highest dividend yields on the TSX. This Canadian stock pays a $0.86 dividend every quarter. That is equal to a 6.6% annual yield. Strong energy markets should support a positive sentiment shift for this stock in 2022. Higher oil prices will eventually support higher volume throughput across its transportation system.
Enbridge faced several legal and environmental headwinds in 2021. Most of those have been resolved. It is broadening its natural gas transmission/distribution businesses, building out more renewable power projects, and investing in alternative fuels. The company is starting to focus on becoming an energy transition stock rather than a “pipeline stock,” and that bodes well for the long term.
Algonquin Power: A top utility
Another Canadian dividend stock that looks undervalued right now is Algonquin Power (TSX:AQN)(NYSE:AQN). Over the past year, the stock is down 18%. Right now, its dividend yield is trading close to 5%, which is significantly higher than its five-year average of 4.3%.
Algonquin has both utility and renewable power operations. It just announced a large acquisition of a power utility in Kentucky. The market didn’t really like the deal, but it plays well into Algonquin’s proficiency at helping carbon-heavy utilities turn green.
While earnings growth is slowing with this utility, it is still growing faster than most peers. Given its relative underperformance in 2021, this green energy stock should see some recovery later this year.
Alimentation Couche-Tard: A top retailer
One Canadian stock that could do really well if the pandemic starts to abate is Alimentation Couche-Tard (TSX:ATD). As one of the largest operators of convenience stores and gas stations in the world, it stands to benefit from increased commuting and travelling. Couche-Tard has done a great job allocating capital through the years. That has supported an 841% price return over the past decade.
The market is doubting its ability to grow further, and it is relatively cheap with an enterprise value-to-EBITDA ratio of 12. The company is very efficient at converting earnings to cash. It is using that excess cash to aggressively buy back stock, invest in organic growth, and acquire tuck-in convenience retailers.
Calian Group: A top Canadian GARP stock
If you are looking for one growth stock at a reasonable price, Canadian investors may want to look at Calian Group (TSX:CGY). You don’t hear this stock discussed much, and that is perhaps where the opportunity is. It has a diversified business in healthcare, advanced technologies, IT services, and education.
Over the past few years, Calian has been growing revenues by +20% and EBITDA by nearly double that rate. It has been growing nearly 10% a year organically, and a number of great acquisitions are helping boost its margin profile.
Today, the company has $78 million in net cash, so it has the dry powder to keep diversifying its operations by acquisition. Analysts have a price target over $80 per share. At $56 per share, Calian could see significant upside in 2022.