Undervalued Canadian Stocks to Watch in June 2024

Are you looking for value? These undervalued Canadian stocks are in the prime position for future growth and income for investors.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published June 19, 2024 4:30 pm EDT

When it comes to finding the best and brightest, undervalued stocks on the Canadian markets is a surefire way to make gains. However, it can be a bit more difficult to figure out what makes Canadian stocks undervalued.

Still, here are some points to look for. Of course, we continue to go through an economic downturn. Interest rates are up but coming down, as is inflation. This has led to a more positive market sentiment, leading to better stock performance.

For the undervalued metrics, investors should consider a few points. A low price-to-earnings (P/E) ratio relative to the company’s historical P/E or the P/E ratios of comparable companies may indicate undervaluation. Price-to-book (P/B) ratios below one can suggest that a company’s stock is trading for less than its book value. A discounted cash flow (DCF) analysis can help determine if a stock is undervalued based on the present value of its expected future cash flows. And finally, a higher dividend yield compared to the average. So, let’s look at some stocks that fit the mould.

BRP stock

When it comes to undervalued stocks, one of the top companies to consider is BRP (TSX: DOO). BRP stock, known for its power sports vehicles and marine products, is currently considered undervalued based on several key valuation metrics and market factors. Despite facing some headwinds, such as reduced shipments and economic uncertainties, the company continues to demonstrate strong potential for growth and profitability.

BRP’s P/E ratio for 2026 is estimated to be around 9.94. This is relatively low compared to industry averages. This suggests that the market has not fully priced in the company’s earnings potential, making it an attractive buy for value investors. Furthermore, despite a challenging economic environment, BRP reported strong earnings growth. For instance, in the fiscal year ending January 2024, BRP had an annual revenue of $9.97 billion, showing consistent growth. This demonstrates the company’s ability to generate significant revenue even in difficult conditions.

Analysts have set a 12-month price target for BRP’s stock at an average of $108.29, suggesting a potential upside of about 25% from its current trading price of approximately $86.50. This substantial upside indicates that the stock is undervalued relative to its expected future performance.

Overall, BRP stock’s strong market position with popular brands like Ski-Doo, Sea-Doo, and Can-Am enhances its competitive edge. The company’s consistent innovation and robust product lineup support its long-term growth prospects. This may not be fully reflected in the current stock price. So, with a P/E ratio of 11.65 and 0.97% dividend yield, it looks like a prime buy among undervalued stocks.

Sigma Lithium

Another area of the market that investors will want to consider for undervalued socks is lithium. Above them all, Sigma Lithium (TSXV: SGML) looks like a prime choice. Sigma stock focuses on lithium production for the burgeoning electric vehicle (EV) market and is also considered undervalued based on several key metrics.

With the increasing demand for lithium-ion batteries in electric vehicles and energy storage solutions, Sigma Lithium is well-positioned to benefit from this trend. The anticipated surge in demand for lithium has not yet been fully priced into the company’s stock.

Furthermore, Sigma stock has been expanding its production capacity. This is expected to significantly increase its output in the coming years. This capacity expansion aligns with the growing global demand for lithium. This should drive future revenue growth.

Analysts have given Sigma Lithium strong buy ratings, indicating a high level of confidence in the company’s future performance. The positive ratings are based on the company’s strategic initiatives and its position within the high-growth lithium market.

Despite its potential, Sigma Lithium’s stock is trading at a valuation that does not fully reflect its future earnings potential. This discrepancy between current valuation and future prospects presents an opportunity for investors looking for undervalued stocks in the high-demand lithium sector. So, with a forward P/E ratio of 27.62, below the market norm, it looks like a prime choice for investors.