The start of 2025 has been full of opportunities for Canadian investors. With interest rates still elevated and considerable uncertainty in markets, many Canadian stocks are trading undervalued. You can buy them now and plan to hold for the long haul.
When there is so much uncertainty in the market and economy, it creates unique opportunities to buy these stocks while they’re ultra-cheap, especially since these headwinds don’t typically last.
With that said, though, it’s essential to understand how each company you’re considering is being impacted by the current environment in order to determine if the dip in price is temporary and it has the potential to recover quickly or whether these headwinds could impact its operations for the foreseeable future.
So, with that in mind, if you’ve got cash that you’re looking to invest, here are two top undervalued Canadian stocks to buy now.
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One of the best and most reliable undervalued Canadian stocks to buy now
Many of the cheapest stocks on the TSX are also, unsurprisingly, businesses with elevated risks. That’s why Brookfield Renewable Partners (TSX:BEP.UN) while trading so cheaply – more than 20% off its 52-week high, and right near the bottom of its 52-week range – is one of the best undervalued Canadian stocks to buy now.
Even if Brookfield wasn’t this undervalued, it would still be an excellent long-term investment due to the decades of growth potential that the renewable energy industry has, as well as Brookfield’s position as one of the largest and most dominant green energy companies in the world.
However, the fact that it trades so cheaply and continues to execute at such an impressive level certainly makes it one of the best stocks to buy now.
For example, in 2024, its revenue increased by 16.6%, and analysts predict another 16.4% increase in revenue during 2025. Furthermore, its funds from operations (FFO) per share jumped 9.6% in 2024 and analysts estimate it will increase another 10.2% in 2025.
So not only is Brookfield growing its sales rapidly, but it’s also growing its profitability at an impressive pace. Therefore, with the stock selling off as it simultaneously becomes more profitable, it’s quickly become ultra-cheap.
Right now, its forward price to FFO ratio is just 10.7 times. That’s nearly the lowest it’s been in the last five years and well below its five-year average forward P/FFO ratio of 19.1 times.
Furthermore, as the stock has sold off its yield has risen quickly. In fact, it currently offers a yield of 7%, which is considerably higher than its five-year average forward yield of 4.4%.
Therefore, it’s no surprise that of the 11 analysts covering Brookfield, 10 analysts rate the stock a buy, with the remaining analysts giving it a hold rating. Plus, its average target price of $43.09 is a nearly 40% premium to where the stock trades today, showing why Brookfield is one of the best undervalued Canadian stocks to buy now.
An ultra-cheap stock on the verge of a significant recovery
In addition to Brookfield, Air Canada (TSX:AC) is another undervalued stock trading well off its 52-week high to buy now.
Of course, Air Canada does have a bit more risk and less reliability than Brookfield, but it also has even more upside when it finally starts to recover.
The higher risk stems from its operating in a more competitive industry with less natural long-term growth potential, although travel is still expected to continue growing for years to come. It also has more risk because it continues to deal with elevated debt that it took on during the pandemic.
With that said, though, the stock is trading ultra-cheaply today, and analysts expect its revenue to jump nearly 5% in 2025 to another new record high.
Furthermore, of the 10 analysts covering Air Canada, eight give it a buy rating, while the other two give it a hold rating. In addition, its average analyst target price of $27.46 is roughly 47% higher than the stock’s current price.
So, if you’re looking for a stock with significant recovery potential and are willing to take on a bit more risk, Air Canada is undoubtedly one of the top undervalued Canadian stocks to buy now.
