These Are the Top 4 Undervalued Stocks to Buy Right Now

These four undervalued stocks offer a change to get in on great value long term, with promising futures ahead.

Amy Legate-Wolfe

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. Before joining Motley Fool Canada, she 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. 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 January 14, 2025 4:30 pm EST

| More on: BLXBNSPOWSAP

Undervalued stocks often present unique opportunities for investors to buy quality companies at a discount, typically when market prices do not reflect their intrinsic value. This can happen for several reasons, such as temporary setbacks, broader market sentiment, or overlooked growth potential. Let’s dive in and explore some undervalued options that look like standout picks on the TSX.

dividends grow over time — Source: Getty Images

Power

At $42.38 per share, Power Corporation of Canada (TSX:POW) certainly looks undervalued, trading at a forward price/earnings (P/E) ratio of 8.5, significantly below the sector average. This signals that the market is undervaluing its earnings potential despite its strong portfolio of financial services companies.

Recent quarterly earnings showed a decline (-61% YoY), which might explain investor caution. However, this drop was largely due to short-term market conditions, not fundamental weaknesses. POW’s diversified revenue streams and impressive operating cash flow of $5.7 billion highlight its stability. The stock’s 5.3% dividend yield, supported by a sustainable 63.9% payout ratio, makes it a reliable pick for income-focused investors.

Saputo

Iconic Canadian dairy producer Saputo (TSX:SAP) is facing a perfect storm of challenges, including cost inflation and industry competition. Yet, at $23.31 per share and a forward P/E of 11.2, the undervalued stock looks attractive, especially given its recent 8.9% revenue growth.

While its earnings dipped by 19.2% year-over-year, Saputo’s long-term strategy of expanding into international markets and diversifying its product offerings remains on track. Its current dividend yield of 3.3% is higher than its five-year average, thus offering income investors a chance to lock in steady payouts. Behind the undervalued stock is a dairy company whose commitment to operational efficiencies and new growth opportunities, like plant-based products, positions it well for the future.

Boralex

Renewable energy stocks like Boralex (TSX:BLX) have been under pressure recently due to rising interest rates and temporary market headwinds, pushing its stock down to $26.01 from a 52-week high of $36.68. However, this correction makes BLX an enticing opportunity for long-term investors.

With a forward P/E of 22.8 and an earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 20.1%, Boralex is a leader in renewable energy production, one focusing on wind, solar, and hydroelectric power in Canada and Europe.

Despite a decline in quarterly revenue growth of 12.5%, the undervalued stock has maintained robust operating cash flow of $476 million, thus demonstrating its ability to weather short-term challenges. Its 2% dividend yield, though modest, is a bonus for those seeking exposure to the renewable sector’s long-term potential. As the world transitions to cleaner energy, Boralex is well-positioned for significant growth.

Scotiabank

Trading at $73.02, Bank of Nova Scotia (TSX:BNS) combines stability with an impressive dividend yield of 5.3%, making it a favourite among Canadian income investors. The stock’s forward P/E ratio of 10.5 reflects the broader cautious sentiment around banks, yet BNS has key differentiators.

Its quarterly revenue grew slightly (+0.90% YoY), and its profit margin of 25.4% underscores its operational efficiency. What sets BNS apart is its strong presence in international markets, particularly in Latin America, which offers diversification that other Canadian banks lack. The undervalued stock’s book value per share of $65.87 indicates the stock is trading close to its intrinsic value, offering limited downside risk and plenty of upside potential.

Foolish takeaway

These four stocks stand out because they combine defensive characteristics with growth opportunities, all while trading below their intrinsic values. For POW, its diversified portfolio and strong cash flow make it a safe bet even in volatile markets. SAP is a resilient name in a defensive sector, offering a chance to benefit from stable demand and operational improvements. BLX appeals to those eyeing the renewable energy boom, while BNS provides a solid mix of high dividends and international growth.

So while each of these stocks faces its own unique challenges, the current valuations provide an attractive entry point for long-term investors. Whether you’re after reliable dividends, future growth, or a mix of both, POW, SAP, BLX, and BNS offer compelling undervalued stocks to make a part of your portfolio.