The TSX Composite Index has surged by more than 19% so far in 2024, making it difficult for value investors to find undervalued opportunities in the Canadian market. Declining interest rates and easing inflationary pressures could be the main reasons for investors’ confidence of late, leading to a rally in equities. Despite the broader market rally, however, some fundamentally strong stocks are still attractively priced with the potential for a strong recovery in the coming years.
In this article, I’ll highlight two such undervalued Canadian stocks you can buy on the dip right now and hold for years to come to expect strong returns on investments.
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Magna International stock
Magna International (TSX:MG) has dived by nearly 24% year to date to currently trade at $59.76 per share with a market cap of $17.1 billion. If you don’t know it already, this Aurora-headquartered company primarily focuses on providing automotive components and mobility technology solutions to large automakers globally, including electric vehicle (EV) manufacturers.
This steep decline in Magna’s stock this year can largely be attributed to higher input costs and softer vehicle production, which have affected its financial growth trends in recent quarters. As a result, its total revenue in the first three quarters of 2024 fell 0.4% YoY (year over year) to US$32.2 billion. Meanwhile, its adjusted earnings for these nine months decreased 8.8% from a year ago to US$3.71 per share, missing Street analysts’ expectations.
Despite these short-term challenges due to the challenging macroeconomic environment, Magna’s continued focus on expanding its portfolio of innovative mobility technology solutions, especially for EVs and autonomous vehicles, strengthens its long-term growth outlook.
Besides that, as lower interest rates gradually improve economic activity and consumer spending in the coming quarters, Magna could post higher sales and profitability, which should lead to a recovery in its share prices. Interestingly, MG stock also offers an attractive 4.4% annualized dividend yield at the current market price, making it even more attractive for income-focused investors.
BlackBerry stock
BlackBerry (TSX:BB) is another beaten-down but fundamentally strong Canadian stock you can consider adding to your portfolio now. Currently trading at $3.27 per share, down more than 30% from its previous year’s closing, BB stock has a market cap of $1.9 billion.
While this Waterloo-based software company makes most of its revenue from its enterprise cybersecurity operations, its fast-growing portfolio of IoT (Internet of Things) solutions is what makes its long-term outlook even brighter.
In the quarter ended in August 2024, BlackBerry pleasantly surprised investors and analysts by reporting breakeven adjusted earnings as it continued to streamline operations and cut costs. While sales in both cybersecurity and IoT segments witnessed double-digit YoY growth, it maintained a robust gross margin of 82%.
As the tech firm continues to focus on profitability, its management recently outlined a clear path for future growth. These efforts mainly focus on strengthening IoT and cybersecurity segments with the help of its QNX platform and artificial intelligence or AI-driven solutions like Cylance, which focuses on proactive cybersecurity measures. As the demand for such advanced tech solutions continues to surge, you can expect BB stock to stage a recovery in the coming years.
