Value investing is one of the most effective ways to build long-term wealth. In Canada, plenty of stocks are currently trading below their intrinsic value due to temporary headwinds, creating opportunities for value-focused investors to capitalize before they recover.
Whether it’s companies with strong cash flow, solid dividends, or resilient business models, identifying undervalued stocks with long-term upside is key to successful value investing.
So, if you’re looking to find compelling deals in today’s market, here are five of the best value stocks for Canadian investors.
Source: Getty Images
Two of the best investments to buy and hold long-term
When it comes to value investing, you don’t just want to buy stocks that only have potential as they recover; it’s much better to look for high-quality, long-term investments that you can buy cheaply. That’s why Nutrien (TSX: NTR) is one of the best stocks to buy now.
Nutrien is one of the world’s largest providers of agricultural inputs and is currently trading at an attractive valuation due to cyclical downturns in crop nutrient prices.
With the global population continuing to grow, demand for agricultural products will only increase, and Nutrien is well-positioned to benefit from rising food demand and improving commodity prices.
So, with Nutrien trading over 45% below its all-time high reached back in 2022, it’s certainly a top value stock to buy now.
Meanwhile, Empire (TSX: EMP.A) is another excellent value stock to buy now.
Empire is the parent company of Sobeys. So not only is it trading at a discount but it’s also a top defensive stock that offers long-term stability and steady growth.
While inflation and changing consumer spending habits have impacted grocery retailers, Empire continues to generate strong earnings and expand its operations.
Currently, Empire trades at a forward price-to-earnings ratio of just 14.1 times, below its 10-year average of 15.3 times. Furthermore, its current dividend yield of roughly 2% is above its 10-year average of 1.75%, making it a stock you’ll want to buy before it fully recovers.
An ultra-cheap real estate stock
Many real estate stocks are trading cheaply due to higher interest rates, but one of the most undervalued stocks in the sector is InterRent REIT (TSX: IIP.UN).
InterRent REIT is a residential real estate investment trust (REIT) that owns rental properties in high-demand urban markets across Canada. And with interest rates starting to decline already and expected to continue being reduced, InterRent is positioned for a rebound.
Today, it trades at a forward price-to-funds-from-operations (P/FFO) ratio of just 15.1 times, well below its five-year average of 24.2 times.
So, if you’re looking to add a high-quality REIT at a discount, InterRent is one of the best value stocks on the market today.
Two high-quality dividend stocks for value investors to buy
Buying dividend stocks that are undervalued not only gives you the chance to see substantial capital gains as the stocks recover, but you can also lock in a higher yield while the stock trades cheaply.
That’s why two of the best value stocks to buy now are CT REIT (TSX: CRT.UN) and Telus (TSX: T).
CT REIT is another real estate stock trading at a discount, with a unique advantage—its primary tenant and majority owner is Canadian Tire, one of the country’s most well-known and financially stable retailers.
And even with higher interest rates weighing on profitability, CT REIT has maintained strong financials, steady rent increases, and a growing dividend. Therefore, as interest rates decline, REIT valuations should improve, making now a compelling time to buy this stock at a discount.
Today CT REIT trades at a forward P/FFO ratio of just 10.75 times, below its five-year average of 12 times.
Meanwhile, telecom stocks like Telus are known for their stability, so although short-term pressures, such as increased competition and higher debt costs, have weighed on the stock, Telus continues to generate reliable cash flow and expand its market share.
Today, Telus trades at a forward enterprise value to earnings before interest, taxes, depreciation, and amortization ratio of just 8.3 times, below its five-year average of 8.7 times. In addition, its current dividend yield of 7.6% is above its five-year average of 5.6%.
So, if you’re looking for value stocks to buy now, Telus is certainly one of the best to consider.
