5 Undervalued Canadian Value Stocks to Watch in Spring 2023

Certain TSX stocks, like Suncor Energy stock, are currently trading at rock-bottom valuations, despite strong fundamentals.

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Spring is a rebirth. As the flowers begin to bloom, let’s check in on the market and breathe new life into our portfolios. In this article, I would like to highlight five undervalued stocks that you might want to consider buying, as they appear to be setting up for a rebound in the months ahead.

Cineplex stock: Recovering from the pandemic

I’ve written a lot about how I believe that Cineplex (TSX:CGX) is trading at unreasonably low valuations. In fact, the more that time has gone by, the more confident I become. This is because the company continues to show strong momentum, as it recovers from the pandemic. And Cineplex stock is only beginning to reflect this.

Let’s look at Cineplex’s latest quarter, the first quarter (Q1) of 2023, to get a sense of what I mean. Attendance was up 46%, revenue increased 49%, and earnings before interest, taxes, depreciation, and amortization soared to $20.2 million from a loss of $5.7 million last year. Clearly, people are heading back to the theatres. But the strength in Cineplex’s results was also driven by its other, non-movie businesses, which account for approximately 30% of Cineplex’s revenue.

Cineplex stock currently trades at 9.5 times next year’s expected earnings.

Nutrien stock: Undervalued and unappreciated

As the world’s largest provider of crop inputs (fertilizer) and services, Nutrien (TSX:NTR) is an integral part of the global food supply chain. As such, Nutrien is benefitting from an industry that has a steady long-term growth profile. Defensive and undervalued, this value stock offers investors the best of both worlds.

In the last five years, Nutrien’s revenue increased 93%. Also, net income has grown almost 115% and cash flow from operations has increased 295%. All of this has brought dividends 40% higher. Yet, Nutrien trades at a mere 12 times earnings. This undervalued stock is clearly unappreciated.

Pembina Pipelines: A value stock yielding 6.4%

Pembina Pipelines (TSX:PPL) is an energy infrastructure company, with assets strategically located in Western Canada. Pembina has approximately $24 billion in assets and a 65-year history. Over the long term, the company has enjoyed the benefits of its stable business model: predictable returns and stable earnings.

Pembina’s latest results came in short of expectations, as the decline in commodities prices hit its marketing and new ventures segment. Despite these disappointing results, Pembina has a long history of solid performance. And today, it has a dividend yield of 6.4%. In fact, the company increased its dividend by 2.3% recently. To top it all off, this value stock currently has an attractive valuation of 15 times this year’s expected earnings.

Suncor: A highly undervalued stock

Suncor Energy (TSX:SU) is Canada’s leading integrated energy company. It has a strong history as a key player in the Canadian oil and gas industry. But in the last few years, Suncor has had some issues. For example, its safety record has been highlighted as problematic. On top of this, its margins have been disappointing. Clearly, Suncor can do better.

The good news is that Suncor has a new chief executive officer who is intent on turning things around. Also, Suncor stock is currently significantly undervalued, trading at only three times cash flow. The company’s first-quarter (Q1) 2023 results were released on May 8. Suncor reported profit that beat analyst estimates, as the company benefitted from strong demand. Also, adjusted funds from operations came in at $3 billion compared to $4 billion last year, as commodity prices weakened.

Well Health Technologies stock

Lastly, Well Health Technologies (TSX:WELL) is another undervalued stock to keep an eye on. It’s also a growth stock that’s benefitting from significant momentum. Well Health stock skyrocketed this year. However, shares of this stock have plunged 20% so far in May.

Yet results out of Well Health have been nothing short of spectacular. Last quarter, the company reported a 47% increase in revenue to $145.8 million — a record. This was driven by acquisitions and an 18% organic growth rate. Strong patient engagement hit a record, and virtual services soared 191%. Thus, management raised guidance for the fourth consecutive quarter.

Well Health stock trades at 29 times 2024 estimated earnings. Yet earnings are expected to grow at 275%, which makes Well Health an undervalued stock.

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 Karen Thomas has positions in Cineplex, and Well Health Technologies. The Motley Fool recommends Cineplex, Nutrien, and Pembina Pipeline. The Motley Fool has a disclosure policy.

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