The Canadian stock market has traded on a weak note in the last two years. After shedding nearly 9% of its value in 2022, the TSX Composite benchmark currently trades with a minor 1% year-to-date gain. Despite starting the year on a strong note by rising 3.7% in the first quarter of 2023, the index has fallen sharply since then due mainly to continued high inflation and rapidly rising interest rates.
Nonetheless, this market correction has made some top Canadian stocks look undervalued to buy for the long term that could turn out to be big winners in the coming years. That’s why the ongoing bear market could be an opportunity for investors to buy such stocks at a bargain on the Toronto Stock Exchange. Let’s take a closer look at two such stocks.
MTY Food stock
MTY Food Group (TSX: MTY) is a Saint Laurent-based franchisor that also operates multiple concepts of restaurants globally. It currently has a market cap of $1.3 billion, as its stock trades at $52.96 per share after losing nearly 15% of its value in the last month. At this market price, MTY also offers a 1.8% annualized dividend yield and distributes these dividend payouts on a quarterly basis.
Shares of companies that have seen a massive decline in their financial growth due to the challenging macroeconomic environment have been affected the most by the recent market selloff. However, this doesn’t seem to be the case with MTY Food.
Even as inflationary pressures and a high interest rate environment have affected consumer spending lately, the company’s sales rose 87.4% YoY (year over year) to $889.3 million In the first three quarters of its fiscal year 2023 (ended in August). With this, MTY posted a more than 28.7% YoY increase in its adjusted earnings during the same period to $3.59 per share.
Given its strong financial performance, this Canadian stock’s sharp declines in recent months make it look really cheap to buy today for the long run.
North West Company stock
North West Company (TSX: NWC) could be another top Canadian stock with dividends that you can buy on the dip now. This Winnipeg-headquartered firm runs a network of grocery and retail stores in Canada and other international markets. It has a market cap of $1.7 billion, as NWC stock trades at $35.90 per share after sliding by 11% in the last six months. The stock also offers a decent 4.3% annualized dividend yield at the current market price.
Although high inflation and a shift in consumer spending have affected North West Company’s financial growth trends in the last year, it’s still maintaining a positive earnings growth trend due partly to its recent strategic initiatives. In the first three quarters of its fiscal year 2024 (ended in July), North West’s total revenue increased by 8% YoY to $1.8 billion, while its adjusted earnings for this period rose 7.8% from a year ago to $2.08 per share.
Besides its strong long-term fundamentals, North West Company’s continued focus on driving strategic operational efficiencies to mitigate the impact of inflation could help this top Canadian stock recover fast in the coming quarters.
