While the TSX index is trading near all-time highs, several stocks continue to trade at a cheaper valuation due to sector-specific headwinds. Here are three undervalued Canadian stocks you can consider buying right now.
VersaBank stock
Valued at $472 million by market cap, VersaBank (TSX:VBNK) provides various banking products and services in Canada. It offers deposit products such as guaranteed investment certificates, registered retirement savings plans, daily interest savings accounts, and deposit insurance products.
VersaBank provides lending services, including point-of-sale financing, which involves purchasing loan and lease receivables from finance companies operating in multiple industries, and commercial banking services, such as commercial real estate, infrastructure financing, and more.
The company ended the fiscal third quarter (Q3) with total assets of $4.5 billion, an increase of 13% year over year due to growth in digital banking operations. Analysts tracking the TSX stock expect its adjusted earnings to expand from $1.57 per share in fiscal 2023 (ended in October) to $2.38 per share in fiscal 2025.
So, priced at 7.6 times forward earnings, VersaBank stock is cheap, given its earnings growth estimates. Moreover, it also pays shareholders an annual dividend of $0.10 per share, translating to a forward yield of 0.55%.
Celestica stock
Valued at $8 billion by market cap, Celestica (TSX:CLS) provides a hardware platform and supply chain solutions. It offers a range of product manufacturing and related supply chain services. The company also provides enterprise-level data communications and information processing infrastructure products such as routers, switches, edge solutions, servers, and storage-related products.
The TSX stock has returned close to 500% to shareholders in the last 10 years. However, it trades 23% from all-time highs and is a top investment option right now.
Celestica is forecast to increase its sales from $11 billion in 2023 to $13.56 billion in 2025. Comparatively, its adjusted earnings are forecast to expand from $3.35 per share to $4.95 per share in this period. So, priced at 0.6 times forward sales and 13.5 times forward earnings, CLS stock is cheap and trades at an 18% discount to consensus price target estimates.
Adentra stock
The final TSX value stock on the list is Adentra (TSX:ADEN). It is engaged in the wholesale distribution of architectural building products to residential and commercial construction markets. It offers decorative surfaces, specialty plywood and composite panel products, and many other moulding products.
Adentra’s sales have increased from $902.5 million in 2019 to $2.16 billion in the last 12 months. Comparatively, its operating income has more than doubled from $37 million to $94 million in this period.
Due to its stellar revenue and profitability growth, Adentra has returned close to 360% to shareholders after adjusting for dividend reinvestments since September 2014. The company pays shareholders an annual dividend of $0.56 per share, indicating a yield of 1.3%. Additionally, these payouts have more than doubled in the last seven years.
Analysts expect ADEN stock to expand earnings from $3.3 per share in 2023 to $4.83 per share in 2025. So, priced at 8.7 times forward earnings, the TSX dividend stock trades at a 30% discount to consensus price target estimates.
